February was not a good month for a2 Milk shares…
The post The A2 Milk (ASX:A2M) share price crashed 16% last time it reported appeared first on The Motley Fool Australia. –
Later this week the A2 Milk Company Ltd (ASX: A2M) share price will be on watch when it releases its full year results.
With its shares down 43% since the start of the year, clearly expectations are low this time around.
However, that wasn’t the case in February when the company released its results. And unfortunately, with the company failing to deliver on expectations, the a2 Milk share price came crashing down to earth.
What happened to the A2 Milk share price last time it announced its results?
In February, the a2 Milk share price dropped 16% after it posted a 16% decline in revenue to NZ$677.4 million and a 32.2% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to NZ$178.5 million.
Though, the biggest impact to the a2 Milk share price came from what was the third downgrade to its earnings guidance of FY 2021.
The company was originally guiding to strong revenue growth with an earnings before interest, depreciation and amortisation (EBITDA) margin of 30% to 31% in FY 2021.
But just a few weeks later in September the company downgraded its guidance to revenue of NZ$1.8 billion to NZ$1.9 billion but held firm with its ~31% margin guidance. This would mean modest revenue growth of 4% to 10% and EBITDA of NZ$558 million to NZ$589 million for the year.
Then in December, its revenue guidance was downgraded by almost half a billion dollars to NZ$1.4 billion to NZ$1.55 billion. Management also downgraded its margin guidance to 26% and 29%, which implies EBITDA of NZ$364 million to NZ$450 million.
Half year results guidance downgrade
It got worse. Investors were quick to sell down the a2 Milk share price with the release of its half year results when management downgraded its guidance to revenue of NZ$1.4 billion with EBITDA of NZ$336 million to NZ$364 million. A far cry from where it started.
Unfortunately, that wasn’t the end of the story, with a further downgrade coming in May.
This means that when a2 Milk hands in its full year results this week, it is expecting to report revenue of NZ$1.25 billion with EBITDA of NZ$132 million to NZ$150 million. The latter will be a reduction of 73% to 76% year on year.
Investors will be hoping the bar has been set so low this time that the company outperforms this guidance. Though, as we have seen over the last 12 months, a miss would not be beyond the company.
Should you invest $1,000 in A2 Milk right now?
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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.