A little under three months after releasing a trading update that downgraded earnings guidance for FY22 by -10%, pharmaceuticals wholesaler, Sigma (ASX: SIG) has guided to a 10% to 15% rise in earnings (EBITDA) for the year ending January 31.
Much of the albeit about face in Sigma’s earnings expectations comes from unprecedented consumer demand for rapid antigen tests (RATs).
Sigma noted that most of the 40m RAT tests imported only a few weeks ago were quickly in the hands of customers via national retailers like Chemist Warehouse, community pharmacies and the government.
But despite the RATs windfall, management still expects a negative bottom line result due to the imposts associated with new enterprise resource planning (ERP) system and associated sales disruptions.
Due to the impact of the SaaS accounting policy change (in excess of $30m) in the current year, plus business disruption and the closure of the Rowville Distribution Centre late January, reported net profit (NPAT) is expected to result in a loss of -$5m to -$10m for the year.
Sigma’s full year results are scheduled for announcement on 29 March 2022.
Late last year (07/12/21), Credit Suisse downgraded the company to Neutral from Outperform after noting that updated guidance implied a -27% year-on-year underlying earnings decline in the second half, with the target price decreasing to $0.53 from $0.70.
Consensus on Sigma is Moderate Buy.
Based on Morningstar’s fair value of $0.68, the stock appears to be undervalued.
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