The Coca-Cola Amatil Ltd (ASX: CCL) share price is pushing higher on Friday morning.
At the time of writing the beverage company's shares are up 1.5% to $8.47.
Why is the Coca Cola Amatil share price pushing higher?
Investors have been buying the company's shares this morning after they were upgraded by a leading broker.
According to a note out of Goldman Sachs, it has upgraded Coca-Cola Amatil's shares to a buy rating with a $9.30 price target ahead of its half year results release later this month.
It made the move largely on valuation grounds and notes that at 14.4x FY 2022 earnings, it is trading at a notable discount to consumer staple peers Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).
In addition to its buy recommendation, the broker has laid out its expectations for Coca-Cola Amatil during the first half of FY 2020.
What does Goldman expect from the company in the first half?
When Coca-Cola Amatil reports its half year results on 20 August 2020, Goldman is expecting the company to report sales of $2.21 billion. This is an 8.9% decline year on year, but ahead of the consensus estimate of $2.1 billion.
Underlying earnings before interest and tax (EBIT) is expected to decline at a sharper rate. Goldman expects first half EBIT to come in at $215.8 million, down 25.6% year on year. However, this is a sizeable 11.5% higher than the analyst consensus estimate.
The company's key Australia segment is expected to be a drag on its results. Goldman commented: "We expect 1H20 volumes to be down -9.5% in Australia, reflecting the weak trading during COVID-19 lockdowns. Sales are forecast to be at A$1,111mn for the period, -8.6% yoy. However, EBIT declines are forecast to be stronger at -20.3%, resulting from weaker EBIT margins (-170bps) due to the impact of operating leverage being partially offset by cost savings initiatives."
The broker expects it to be a similar story in the Indonesia and PNG region. It explained: "Indonesia and PNG region is forecast to have seen the biggest COVID19 related impact due to the lockdowns overlaying key sales periods like Ramadan. We forecast sales volume to be down -17% in this region for 1H20, but expect revenue to be only down -12.1% yoy to A$512mn, due to a significant FX benefits expected in this half. Management has already guided that the group lost operational scale in the region. We forecast EBIT to be A$23.6mn for 1H20, implying margins down -435bps, after the impact of cost outs."
