Own A2 Milk shares? Here's what to expect from its FY22 results

Will A2 Milk deliver next month?

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The A2 Milk Company Ltd (ASX: A2M) share price will be one to watch next month when the struggling infant formula company releases it full year results.

Ahead of the release, let's take a look to see what the market is expecting from the company.

Half year results reminder

Firstly, as a reminder, A2 Milk had a very difficult start to the financial year.

For the six months ended 30 June, the company reported revenue of NZ$660.5 million and net profit after tax of NZ$56.1 million. This was a decline of 2.5% and 53.3%, respectively, over the prior corresponding period.

And while management believes that its revenue could be stronger in the second half, it warned that this won't necessarily translate into stronger earnings. This was due to its plan to significantly increase brand and other reinvestments to support its growth strategy.

What is the market expecting?

According to recent note out of Bell Potter, its analysts are expecting A2 Milk to report sales of NZ$1,407.2 million in FY 2022.

This will be a big improvement on its first half performance and will mean a year on year increase of approximately 16.6%.

Interestingly, despite management warning that its stronger revenue wouldn't necessarily translate into stronger earnings, Bell Potter is expecting a huge rebound in the company's profits.

It has pencilled in an adjusted net profit after tax of NZ$108.6 million, which will be an increase of 34.6% year on year.

Is the A2 Milk share price good value?

Bell Potter isn't recommending A2 Milk shares as a buy just yet. It currently has a hold rating and $4.75 price target on the company's shares.

Though, based on the current A2 Milk share price of $4.48, this still implies upside of 6% for investors.

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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 Scott Phillips.

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