Since Coca-Cola Amatil Limited (ASX:CCL) released its earnings in June 2018, analyst consensus outlook seem pessimistic, as a -17.7% fall in profits is expected in the upcoming year. However, this outlook is not unfounded, given the negative past 5-year average earnings growth. Currently with a railing-twelve-month profit of AU$463.2m, the consensus growth rate suggests that earnings will drop to AU$381.1m by 2019. Below is a brief commentary around Coca-Cola Amatil’s earnings outlook going forward, which may give you a sense of market sentiment for the company. For those keen to understand more about other aspects of the company, you can research its fundamentals here.
What can we expect from Coca-Cola Amatil in the longer term?
The view from 11 analysts over the next three years is one of positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. To get an idea of the overall earnings growth trend for CCL, I’ve plotted out each year’s earnings expectations and inserted a line of best fit to determine an annual rate of growth from the slope of this line.
By 2021, CCL’s earnings should reach AU$399.9m, from current levels of AU$445.2m, resulting in an annual growth rate of 3.1%. However, if we exclude extraordinary items from net income, we see that earnings is projected to fall over time, resulting in an EPS of A$0.58 in the final year of forecast compared to the current A$0.60 EPS today. Growth in the bottom line seems to suggest reduction in costs rather than purely top-line expansion as earnings is increasing at a faster rate. However, the expansion of the current 9.0% margin is not expected to be sustained, as it begins to contract to 7.7% by the end of 2021.
Future outlook is only one aspect when you’re building an investment case for a stock. For Coca-Cola Amatil, I’ve put together three pertinent factors you should look at:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is Coca-Cola Amatil worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Coca-Cola Amatil is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Coca-Cola Amatil? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.