Earnings preview: Bellamy’s Australia Ltd

On Thursday the Bellamy’s Australia Ltd (ASX: BAL) share price will be on watch when the infant formula company releases its highly anticipated half-year results.

Last month Bellamy’s once again upgraded its full-year guidance following a sustained period of strong demand for its products.

Revenue growth guidance (excluding its Camperdown business) was lifted from between 15% and 20% to a revised target of 30 to 35% on FY 2017’s result. It also revised upwards its EBITDA margin guidance from 17% and 20% up to between 20% and 23%.

Unsurprisingly, this sent its shares hurtling to an all-time high of $16.08. Although it has since given back a lot of these gains, there’s still an awful lot of growth built into its shares right now. Which means that its shares could come under pressure if it fails to deliver on expectations on Thursday.

With that in mind, I thought I would take a look to see what Goldman Sachs expects Bellamy’s to achieve during the first-half.

According to a note out of the investment bank, it expects Bellamy’s to deliver sales of $171 million and earnings before interest and tax of $34 million. This represents growth of 44% and 80%, respectively, on the prior corresponding period.

Due to the seasonality of its sales, second-half sales are expected to come in lower than the first-half at $152.4 million, up 35% on the prior corresponding period.

This will take Bellamy’s full-year sales to $323.2 million, representing year-on-year growth of 35% – the top end of its guidance range.

Furthermore, thanks to costs initiatives, Goldman has forecast a gross margin of 39.3% in the first-half, before rising to 42.9% in the second-half. It doesn’t expect any changes to its most recent guidance.

Should you invest?

Although I expect Bellamy’s to achieve what is expected of it, and perhaps even more, I wouldn’t be in a rush to invest in its shares just yet. Instead, I think the prudent thing to do is wait for the results release and respond accordingly.

The same applies for industry peers A2 Milk Company Ltd (ASX: A2M) and Blackmores Limited (ASX: BKL) which also release their respective results this week.

In the meantime, I think these stellar growth shares can be bought right now. Do you own them?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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