Guess which ASX 200 stock has plunged to a 10-year low

Rising costs are battering this well-known ASX 200 company.

| More on:
A farmer in a regional area uses the internet, while his cows watch on.

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

  • The Bega Cheese share price eclipsed a decade low on Wednesday, reaching $3.07 per share
  • Continued cost pressures may have attracted attention, despite CPI inflation coming in below expectations
  • The ASX 200 company received a price target cut following yesterday's announcement

The Bega Cheese Ltd (ASX: BGA) share price was in a world of pain on Wednesday, cascading to its lowest level in almost a decade. Bega's bitter performance stood out like a sore thumb against a backdrop of the S&P/ASX 200 Index (ASX: XJO) rallying 1.1%.

Adding to yesterday's decline, shares in the dairy food products manufacturer sliced away another 8.5% to close at $3.11. During the session, Bega shares posted another 52-week low of $3.07, setting a sour tone for the day.

Hard-to-swallow update

Yesterday, Bega announced to the market the sale and leaseback of its Port Melbourne site. Management touted the $114.6 million transaction as a win for the company's balance sheet. However, the trading update portion of the release might hold more weight in the eyes of shareholders.

All roads lead to Bega being bitten by inflation as the price for its raw materials, most prominently farm gate milk, grows faster than its bulk commodity prices. Fortunately, Bega has been able to carry out its own price increases while maintaining some brand loyalty.

An expectation that pricing pressures will continue in FY24 might be behind yesterday's investor shakedown. Considering the ASX 200 company posted near-non-existent earnings for the 12 months ending December 2022, the prospect of more pain could be the final straw for some shareholders.

In addition, market participants might be wondering why Bega is struggling with cost pressures as we witnessed a surprise slowing of inflation yesterday. The monthly Consumer Price Index (CPI) came in at a rise of 5.6% — below the 6.1% expected.

What else is hurting this ASX 200 stock?

The discrepancy between the latest inflation print and Bega's rising expenses draws into question the pricing power held by this ASX 200 company. Does it have the brand strength to maintain sustainable margins?

For the team at Bell Potter, the outlook isn't as rosy on the Bega share price. After yesterday's announcement, the broker cut the dairy food maker to a hold and dialled back its price target by 13% to $3.50.

Motley Fool contributor Mitchell Lawler 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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Fallers

A male investor wearing a blue shirt looks off to the side with a miffed look on his face as the share price declines.
Share Fallers

Why Aurizon, JB Hi-FI, Nuix, and Platinum shares are tumbling today

These shares are falling on hump day. But why?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why HMC Capital, Platinum, Sigma, and Skycity shares are dropping today

These shares are having a tough session on Tuesday. But why?

Read more »

Oil worker using a smartphone in front of an oil rig.
Energy Shares

ASX 200 energy shares plunge on shock OPEC move

ASX 200 energy shares like Woodside and Santos are tumbling on Monday. Let’s find out why.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Brainchip, Helia Group, Reliance Worldwide, and Westpac shares are dropping today

These shares are starting the week in the red. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why Block, Corporate Travel Management, Judo, and Zip shares are sinking today

These shares are missing out on the good times on Friday. But why?

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Fallers

These were the worst-performing ASX 200 shares in April

These shares were out of form last month. But why?

Read more »

Man waiting for his flight and looking at his phone.
Travel Shares

Corporate Travel shares crash 11% as Trump tariffs bite

Trump’s tariffs are roiling Corporate Travel shares on Friday.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Brainchip, DroneShield, Resolute Mining, and Woodside shares are falling today

These shares are under pressure on Thursday. What's going on?

Read more »