The Motley Fool

Week 3 earnings recap: The ASX winners and losers you should know about

Last week was a dramatic week for some of the most anticipated full year reports, with many big names falling behind expectations. Here are some of the big movers you should know about.

Costa Group Holdings (ASX: CGC)

The market was unambiguously disappointed by Costa Group’s half year performance, slashing the Costa Group share price down by 22% to $2.97 (at the time of writing). With its shares trading at a price-to-earnings (P/E) of 29 prior to the announcement, the group’s revenue growth of 11.8% and net profit after tax (NPAT) growth of 5.5% left much to be desired. The company’s underlying figures, not accounting for asset revaluations, were even worse – EBITDA-SL fell 8.4%, whilst NPAT-SL fell by 15%.

Costa Group’s success in the tomatoes and citrus segments were offset by wholesale pricing issues in mushrooms and avocados, and its African Blue subsidiary significantly underperformed expectations, despite harvest volumes being up 20% on the prior year. The outlook for Costa remains uncertain, and it’s debated whether this half year’s poor performance is due to unfortunate circumstance or reflective of a larger, fundamental issue. Management has not given earnings guidance for the full calendar year 2019.

A2 Milk Company Ltd (ASX: A2M)

Shareholders in this market fared no better, despite the company reporting growing revenues by 41.4% to NZ$1304.5 million, and net profit by 47% to NZ$413.6 million. But with the a2 Milk share price down more than 15% since the announcement, it appears this growth was not enough to outpace the market’s lofty expectations.

Whilst these were solid overall results, they are ultimately a lagging indicator of the company’s prospects, and investors are beginning to see the limitations of its growth. a2 Milk has faced difficulty in the UK market, and an escalating trade war could potentially slow down the infant formula machine that drives 81% of the company’s revenues. A marketing investment of NZ$135.3 million (or 10.4% of revenues) is expected in FY20, but even then, investors don’t appear too confident that a2 Milk will be able to sustain the phenomenal growth it has had in the past.

BWX Limited (ASX: BWX)

One company which came as a pleasant surprise was BWX, with the company’s new CEO Dave Fenlon optimistic about its “clear strategic roadmap to deliver a turnaround performance”. Whilst the group’s full year revenue of $149.5 million was up less than 0.01% on FY18, the second half of the year did highlight a tremendous 19.9% improvement on 1H19. Given the company’s tumultuous year of management fiascos, it came as little surprise that BWX’s underlying net profit after tax of $11 million was down 55% on the prior period.

The BWX share price is up more than 21% to $2.89 since the announcement last Friday, with the market ecstatic about the growth opportunities in FY20. BWX forecasts revenue growth of 20–25% and EBITDA growth of 25-35% in FY20; the Andalou Naturals brand leading the way with its recent success in both the USA Whole Foods Market and Priceline Australia.

If you're looking for something a little more stable, don't miss our top blue chips for 2019.

Our Top 3 Blue Chip Shares for 2019 – NOW AVAILABLE!

You’re invited! For a limited time, The Motley Fool Australia is giving away an urgent new investment report detailing our 3 TOP BLUE CHIP SHARES to own in 2019.

So if you like trustworthy, stable, high-performing companies that pay fat fully franked dividends – we’ve got you covered!

Stock #1 is a beloved old Australian company turning its attention to high-margin businesses... and rapidly returning cash to shareholders with its hefty dividend...

While Stock #2 is an online powerhouse that’s rapidly gaining market share all around the globe... poised for years (or even decades) of tremendous growth...

Even better, Stock #3 offers a whopping 6.5% grossed-up dividend! Which beats the rates on term deposits right out of the water – and offers the potential for capital gains, too.

You can discover all three shares inside our new report right now. To scoop up your FREE copy, simply click the link below right now. But you will want to hurry – this free report is available for a LIMITED TIME ONLY!


Motley Fool contributor Saran Likitkunawong owns shares of A2 Milk and Costa Group Holdings. The Motley Fool Australia owns shares of and has recommended BWX Limited and COSTA GRP FPO. 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 Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.