The market may have been out of form during the first quarter of financial year 2023, but that didn’t stop the A2 Milk Company Ltd (ASX: A2M) share price from shooting higher.
Over the three months, the embattled infant formula company’s shares rose a sizeable 23%.
This compares favourably to a 1.5% decline by the ASX 200 index over the same period.
Why did the A2 Milk share price smash the market during the quarter?
The main catalyst for the strong performance by the A2 Milk share price was the release of a surprisingly strong full year result at the end of August.
For the 12 months ended 30 June, A2 Milk reported a 19.8% increase in revenue to NZ$1.446.2 million and a 42.3% jump in net profit after tax to NZ$114.7 million. This was well ahead of the market’s expectations.
This was driven by the acquisition of MVM, double-digit China label and English label infant formula sales growth, and ANZ and USA liquid milk sales growth of 1.8% and 30.2%, respectively.
Anything else?
Also giving the A2 Milk share price a boost was the announcement of NZ$150 million on-market share buyback. Management explained that this buyback “demonstrates effective capital management and the improved confidence we have in our strategy, execution and outlook.”
Speaking of its outlook, management pleased investors by guiding to high single digit revenue growth in FY 2023 thanks largely to its infant formula business. It is also expecting EBITDA growth with a modest improvement in EBITDA margin.
Where next for its shares?
Opinion remains divided on where the A2 Milk share price is heading from here.
Bell Potter is bullish and has a buy rating and $6.60 price target on its shares.
Whereas analysts at Morgans are sitting on the fence with a hold rating and $5.87 price target and Macquarie is bearish with its underperform rating and lowly $4.25 price target.
The post Why did the A2 Milk share price rocket 23% in the first quarter? appeared first on The Motley Fool Australia.
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More reading
- How did the A2 Milk share price manage to beat the ASX 200 in September?
- A2 Milk share price drops despite buyback kicking off
- Macquarie reveals ASX 200 shares ‘more likely to outperform in a bear market rally’
- Here’s why the A2 Milk share price is storming higher today
- A2 Milk share price drops despite solid start to FY23
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 Scott Phillips.
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