As reporting season comes to an end, are these leading ASX 200 market darlings falling out of season? Let's take a closer look at how they have performed and what could be in store for FY20.
A2 Milk Company Ltd (ASX: A2M)
a2 Milk announced its full-year results on 21 August, which resulted in the share price dropping more than 10%. The company's core business regions, ANZ and China had performed strongly with record market share and financial results. However, the company cited troubles elsewhere, with its US business posting an EBITDA loss of $44 million, along with confirmation a2 is exiting its UK liquid milk operations. It also hiked its marketing spend, with marketing investment representing 10.4% of sales spend – an 83.7% increase on the prior year.
While a2 maintains its ability to deliver phenomenal growth at a fair valuation, the two struggling regions leave behind a negative impression in what was a decent report. I believe the growth trajectory for a2 is unchanged; however, it will take time for the share price to recover from such a significant fall. This could be an opportunity for investors who take a long-term view on the shares, but patience could pay off too.
CSL Limited (ASX: CSL)
CSL is the gift that keeps on giving, and giving. The company announced its full-year results on 14 August, delivering strong figures including a 17% rise net profit and 11% increase in revenue. The company is forecasting FY20 net profit growth to be within the 7–10% range, which takes into account a one-off financial headwind of transitioning to a new model of direct distribution to China. JP Morgan has increased its price target for CSL to $260, citing its confidence that the company will continue to deliver double digit earnings growth for the distant future.
Magellan Financial Group (ASX: MFG)
Magellan announced its full-year results on 13 August, which placed its shares in a trading halt to raise capital for its new high conviction trust fund. The company delivered strong results across the board with net profit after tax soaring 78% and dividends rising 38%. However, I believe it is very difficult for the Magellan share price to gain any traction in the short-term, given its shares have been priced to perfection, just went ex-dividend, and then completed a capital raising. I do not question the quality of its earnings and ability to deliver strong growth in the future, but I would pass on what currently look like 'discounted Magellan shares'.
