Own A2 Milk (ASX:A2M) shares? Here's what to expect when the company reports on Monday

A2 Milk is expected to post a big profit decline…

| More on:
A female ASX investor looks through a magnifying glass that enlarges her eye and holds her hand to her face with her mouth open as if looking at something of great interest or surprise.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • A2 Milk is releasing its half year results on Monday
  • Expectations are low, with the market expecting its profits to halve
  • Despite this, one broker believes investors should buy its shares

A2 Milk Company Ltd (ASX: A2M) shares will be in focus next week when the struggling infant formula company releases its half year results.

Ahead of the release, let's take a look to see what is expected from the former market darling.

What is the market expecting from A2 Milk?

Expectations are very low for A2 Milk again in FY 2022 due to tough trading conditions and changing consumer preferences in China.

According to CommSec, the market consensus estimate is for a net profit after tax of NZ$60 million for the six months ended 31 December. This will be down 50% from NZ$120 million during the prior corresponding period.

The team at Morgans agrees with the view that A2 Milk will post a sizeable reduction in profits again.

It said: "We expect 1H22 NPAT will be down materially on the pcp given lower revenue, increased costs, five months of MVM losses, higher D&A, reduced interest income and a much higher tax rate."

What about the full year?

Unfortunately, a similarly subdued performance is expected in the second half. For example, Bell Potter is forecasting full year net profit after tax of NZ$117.7 million on revenue of NZ$1,346.1 million. This profit is less than what it recorded during the first half of FY 2021.

However, despite its struggles, Bell Potter remains positive on A2 Milk shares. In fact, the broker has a buy rating and $7.70 price target on the company's shares. Based on where they are trading at present, this implies potential upside of 45% over the next 12 months.

Bell Potter is positive on the future and sees potential for a big recovery in its earnings over the coming years.

It said: "We see the scope for EPS to double by FY26e, if A2M can execute on the China offline expansion strategy, while regaining 50% of the lost sales (from FY20-21) in English label IMF. Exiting the loss making US assets or navigating a turnaround at the MVM asset would likely accelerate this turnaround. We do not see the current share price as reflecting this potential."

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the 'five best ASX stocks' for investors to buy right now. We believe these stocks are trading at attractive prices and Scott thinks they could be great buys right now...

See The 5 Stocks *Returns as of 30 April 2025

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.

More on Broker Notes

Broker looking at the share price.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Broker Notes

After its strategy day, what does Macquarie think Wesfarmers shares are worth?

Let's see what the broker is saying about this blue chip.

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Technology Shares

After surging 13% yesterday, are TechnologyOne shares a buy, hold or sell according to Macquarie?

Valuations matter when investing, and Macquarie feels no different.

Read more »

A woman presenting company news to investors looks back at the camera and smiles.
Broker Notes

Broker reveals which ASX stocks are rate-cut winners

Macquarie is tipping three further interest rate cuts in July, August, and November.

Read more »

Ecstatic woman looking at her phone outside with her fist pumped.
Broker Notes

Where to invest $1,000 into ASX 200 shares in June

Goldman Sachs is tipping these shares as buys. Let's find out why.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Broker Notes

3 amazing ASX 200 shares to buy and hold forever

Brokers think these shares are in the buy zone. Let's see why they could be top buy and hold picks.

Read more »

Two male ASX 200 analysts stand in an office looking at various computer screens showing share prices.
Broker Notes

Macquarie tips 20% upside for this ASX 200 industrials stock

Let's see what the broker is saying about this stock following an update.

Read more »

A young woman lifts her red glasses with one hand as she takes a closer look at news about interest rates rising and one expert's surprising recommendation as to which ASX shares to buy
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »