Danone Opens Higher After Management Raises Growth Outlook

Danone, an infant formula manufacturer based in Ireland which leads the market in both dairy and plant-based product categories, as well as operating other businesses in waters, infant and adult nutrition, saw its stock price jump over 2.5% overnight after the company raised its 2022 sales revenue growth outlook .

Fig.1: Key Figures Six-month Period Ended June 30. Source: Danone Financial Report.

Based on its latest interim financial report, like-for-like (LFL) sales in Q2 2022 were up over 7%, resulting in +7.4% net sales (or €13.3B) for the first half of 2022.  Recurring EPS was up +7.2% (y/y) to €1.63, while recurring operating margin stood at 12.1%.

Danone has businesses around the globe. By region, sales growth of the company in the first half of 2022 are +9.7% (Rest of the World), +8.3% (China, North Asia & Oceania), +7.2% (North America) and +5.4% (Europe). Despite the Russia-Ukraine conflict (Russia is the fifth largest market to Danone in terms of contribution to sales), the management remains optimistic and raised its sales guidance to between +5% and +6% (previously was +3% to +5%).

In fact, Danone has been actively developing different types of products to stay competitive worldwide. These include plant-based formula (to satisfy the demand of flexitarians and vegetarians), protein bars, ageing powder drinks, etc. Its strategy in partnering with various e-commerce platforms has further scaled its presence, bringing a greater variety of offerings to consumers worldwide.

Technical Analysis:

The Daily chart shows #Danone gapped up higher at market open today, before giving up its gains and retracing lower back to €55. Above the current price lies the FR 50.0% level, at €55.88. This level shall confirm whether the formation of head and shoulder pattern is successful. A closure above the level would deem the pattern a failure, thus opening up more upside room towards the next resistance at  €58.10 and €61.26. Otherwise, if the candlestick closes below the FR 50.0%, the 100-day SMA at €53.66 may serve as the nearest support, followed by €50.91 and €46.47.

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Larince Zhang

Market Analyst – HF Educational Office – Malaysia

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