Sharemarket darling A2 Milk is expected by brokers to deliver a "strong" first-half result today, with revenue beyond $400 million and after tax profits estimated at $77 million to $80 million.
Its share price at $9.24 is almost 270% up on a year ago.
Craigs Investment Partners is estimating A2Milk’s first-half revenue at $400 million and after-tax profit of $80 million, while brokerage Forsyth Barr is picking $438 million revenue and a $77.6 million profit.
Both predict a strong result and earnings growth for the half year.
Craigs broker Peter McIntyre said port data on product volumes and daily analysis continued to point to strong sales momentum and interest its its brand.
"Key elements to look for will be continued growth at A2 Milk’s value share in China ... outlook comments for China label growth and fresh expansion in the United States," he said.
In mid-January, A2 Milk announced an expanded distribution deal across nine states of the United States, boosting outlet access almost 30% to 5000 retail stores.
The target states are home to about 60 million people — across the northeast US region, encompassing New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, New Hampshire, Massachusetts, Vermont and Maine.
The distribution expansion would move from about 3600 stores to potentially 5000 retail stores this month.
Mr McIntyre said he was looking for more detail on the US expansion, but also the potential for the launch of new products, which he speculated could be adult nutrition powders.
The A2 Milk US expansion was an example of the company emerging to disrupt another large pool of milk buyers, and it strengthened the case for it to become a potential target for merger and acquisition activity.
Forsyth barr broker Damian Foster said A2 Milk’s strong sales and earnings growth was supported by expansion of its a2 Platinum infant formula into China, and also the broadening distribution into the US market.
"We expect management commentary to indicate a ramp-up in sales through direct channels into China," Mr Foster said.
He noted e-commerce sales through online giant Alibaba were "volatile", but remained in double digits, while the "daigou" channel, direct offline sales, surged in recent months.
Mr Foster said the move into the US also meant increasing costs.
There were several "key uncertainties" for A2 Milk, including sales levels against shipment timing, the impact of higher milk input costs and the costs of China and US marketing and sales.
He expected the full-year 2018 result to maintain strong earnings growth.
