While shares of Coca-Cola Amatil were streaming towards its 52-week high of $10.500, the stock price crashed to trade below $10 on Wednesday, 28 November 2018. At the end of today’s trading session, Coca-Cola Amatil’s share price stood at $9.850 after dropping 2.282% or $0.230 in the intra-day trade.
But why did Coca-Cola Amatil’s shares tumble?
There seems to be a wave of mixed market sentiments driving the share price movement of Coca-Cola Amatil. But the downtrend seen in today’s trade underscores the bearish market sentiments with some experts highlighting that Coca-Cola Amatil stock may not have great potential going forward.
Looking at the historical performance of CCL, it can be seen that stock price of Coca-Cola Amatil has gone up by 17.62% in past six months and over the past one year, the stock has witnessed an attractive daily price change of 30.57%. But this performance chart has been slammed this week as CCL stock price fell 1.18% in the past five days as at 28 November 2018.
For the half year ended 30 June 2018, the company reported significant decline in its underlying earnings and profit driven by soft market conditions in Indonesia which translates a decline of 4.9% in the underlying EBIT of $297.5 million and a decline of 5.9% in the underlying NPAT of $178.8 million.
But on the statutory results front, the company has achieved a significant growth with earnings before interest and tax (EBIT) of $257.2 million, up 6.6% and net profit after tax (NPAT) of $158.1 million, up 12.8% on PCP which reflects an improvement in volume trajectory and revenue across its New Zealand and Fiji business, Alcohol & Coffee and Australian Beverages markets.
Moreover, the company’s joint venture in Coca-Cola bottling operations in Indonesia has been hit by the weaken Indonesian Rupiah. It was recognized that Indonesian Rupiah against the US Dollar has currently fallen to its weakest level over the past 20 years, thereby adversely affecting the performance of its business in Indonesia.
In the medium-term, Coca-Cola Amatil Limited (ASX: CCL) targets to achieve a mid-single digit growth in its Earnings Per Share (EPS), consistent with its shareholders’ value proposition. Company’s New Zealand & Fiji and Alcohol & Coffee businesses are anticipated to deliver consistent growth going forward.
As a part of Accelerated Australian Growth Plan, Coca-Cola Amatil intends to increase its investments in Australia across marketing, technology, price, execution and cold drink equipment. However, due to this investment along with uncertain impact of revenue initiatives in Australia and softening of market conditions in Indonesia, the company expects a significant impact on its near-term earnings and uncertainty in group’s performance level.
Currently, Coca-Cola Amatil’s stock traded at a reasonable price to earnings ratio of 15.970 x with market capitalization of $7.3 billion.
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