It has been a disappointing month of trade for the Coca-Cola Amatil Ltd (ASX: CCL) share price.
During the last 30 days the beverage giant’s shares have lost 16% of their value.
Why is the Coca-Cola Amatil share price down 16% in a month?
Investors have been heading to the exits in their droves after Coca-Cola Amatil provided an update at its investor day event at the end of November.
At the event management warned investors that 2019 would be another “transitional” year for the company.
This is due to the investment required to progress its Accelerated Australian Growth Plan and the Indonesian Accelerate to Transform Plan.
In addition to this, the company warned that volumes in Australia in 2018 were “tracking slightly below 2017” levels, which is very disappointing given the increased investment the business has been making in an attempt to grow volumes.
Should you buy the dip?
While I think that Coca-Cola Amatil is a great company and has attractive defensive qualities, I wouldn’t be a buyer of its shares until it provides clear guidance for FY 2019.
This is because many in the market appear to believe that “transitional” means another year with limited growth.
According to a note out of Citi, it believes Coca-Cola Amatil’s plans to simplify its Australian business and improve its brand presence in the Indonesia market will take both time and money.
As a result, Citi recently reduced its earnings expectations for both FY 2019 and FY 2020. It now believes the company’s target of 5% earnings growth won’t be achieved until FY 2021 at the earliest. I suspect Citi might be accurate with its forecasts judging by the company’s update.
In light of this, I would class Coca-Cola Amatil as a hold and suggest investors look elsewhere in the sector at the likes of A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) instead for buy ideas.
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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 A2 Milk. The Motley Fool Australia has recommended Coca-Cola Amatil Limited. 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 Scott Phillips.
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