The A2 Milk Company Ltd (ASX: A2M) share price is having an excellent start to the week.
In afternoon trade, the embattled infant formula company’s shares are up 12% to $5.95.
Why is the A2 Milk share price racing higher?
Investors have been bidding the A2 Milk share price higher today following the release of its half year results.
In case you missed it, A2 Milk reported a 2.5% increase in revenue over the prior corresponding period to NZ$661 million. Though, this was driven by the inclusion of the Mataura Valley Milk (MVM) business, which wasn’t part of the company in the prior corresponding period.
A better reflection on its performance during the half was that of its core infant nutrition business, which reported a 10.5% reduction in revenue to NZ$471 million. This was driven by the lower birth rate and rapidly changing market dynamics in China.
On the bottom line, things were even worse. A2 Milk reported a 53.3% decline in net profit after tax to NZ$56 million. This compares unfavourably to the market consensus estimate, which according to Commsec was NZ$60 million.
So why are its shares rising?
The catalyst for the rise in the A2 Milk share price today appears to have been its outlook.
Some upbeat commentary from management seems to have offset the profit miss and got investors excited.
A2 Milk’s CEO, David Bortolussi, commented: “The Company’s outlook for 2H22 revenue has improved. It is still expected to be significantly higher than 2H21, and with growth now expected on 1H22 and for FY22, ahead of initial expectations due mainly to growth in China label and English label IMF.”
Mr Bortolussi also revealed that the company has seen an improvement in trajectory in the ANZ reseller/daigou channel and that he is “confident in the long-term China infant milk formula market.”
All in all, this appears to have sparked hopes that the company is now over the worst of its issues. Time will tell if that is the case.
The post A2 Milk (ASX:A2M) share price jumps 12% on ‘improved’ outlook appeared first on The Motley Fool Australia.
Should you invest $1,000 in A2 Milk right now?
Before you consider A2 Milk, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and A2 Milk wasn’t one of them.
The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of January 13th 2022
More reading
- ASX 200 (ASX:XJO) midday update: AGL rejects takeover offer, A2 Milk shoots higher
- A2 Milk (ASX:A2M) share price on watch after half year earnings collapse
- 5 things to watch on the ASX 200 on Monday
- Own A2 Milk (ASX:A2M) shares? Here’s what to expect when the company reports on Monday
- The A2 Milk (ASX:A2M) share price has 40% upside – broker
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended A2 Milk. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
from The Motley Fool Australia https://ift.tt/0ELQvO1
Leave a Reply