Ahead of the release of FY 2024 results in August, Goldman Sachs has been busy updating its earnings forecasts for a number of global growth consumer stocks.
Let's now take a look at what the broker is saying about infant formula company A2 Milk Company Ltd (ASX: A2M), appliance manufacturer Breville Group Ltd (ASX: BRG), and wine giant Treasury Wine Estates Ltd (ASX: TWE).
A2 Milk shares
Goldman is feeling a touch mixed about this infant formula company's outlook. While birth rates in China are improving, it is seeing infant formula pricing instability. It notes:
~5% growth in birth rate (2H24 weighted) with continued CBEC strength, though China Label(CL) pricing instability emerging: Similarly, we observe that the IMF industry remains under-pressure, with recent Mar/Apr Nielsen offline IMF industry growth at -13%. Our recent market visit suggests that the industry is still targeting ~5% birth rate in CY24, though 2H24 weighted.
Positively, the broker feels that the launch of A2 Milk's new Gentle Gold product could be a boost to its sales. It said:
Moreover, we observe the Gentle Gold launch is being widely marketed by daigous to the China market, which we expect to provide support to 2H24 and 1H25 growth. That said, we are starting to observe some pricing instability in China Label, our latest retail spot checks suggest ~10% discount available on Stage 3 CL. While not uncommon in smaller MBS vs other key IMF brands, A2M CL margins to retailers are lower and hence the impact on profitability could be larger.
Goldman has a neutral rating and NZ$7.20 (A$6.47) price target on A2 Milk's shares.
Breville shares
The broker is feeling a lot more positive about Breville. So much so, it believes the company could outperform expectations next month. It said:
We see 2H24 sales +9.3% YoY (+3% vs Factset) on first-time US sell-in to Target, improving HSD EMEA sales and -1% APAC from sluggish ANZ though strong S. Korea.
In addition, the broker highlights that there's still a huge market opportunity to grow into with high barriers to entry. Commenting on the plans of a rival, it adds:
De'Longhi's management remains confident on rising global coffee consumption and premiumization. De'Longhi plans to focus on the fully-automated machines in the De'Longhi portfolio to drive growth (i.e. not directly competing with Breville in semi or fully manual) noting still significant penetration opportunities, even in its home market of Europe i.e. in France, the penetration of bean to cup espresso machines are still ~10% and in the UK this is sub 10%. […] Our recent call with SharkNinja (covered by Brooke Roach, CFA) which has the lowest market share in coffee makers across its over 30+ categories confirms that the entry barriers are higher vs the rest of home appliances.
Goldman has a buy rating and $30.00 price target on Breville's shares.
Treasury Wine shares
Finally, Goldman believes this wine giant will deliver a result in line with expectations next month and could surprise to the upside with its guidance. It said:
Expect TWE FY24 results to be a non-event given tight guidance, though 1H25 run-rate should be strong given the soft 1H24 and lapping both DAOU and Penfolds.
Though, it concedes that the second half of next year could be more challenging. The broker adds:
We see emerging risk in 2H25 depending on continued tracking of Penfolds' retail turn and pricing discipline.
Goldman has a buy rating and $14.70 price target on Treasury Wine's shares.
