Wrapping up Q2 earnings, we look at the numbers and key takeaways for the shelf-stable food stocks, including Utz (NYSE:UTZ) and its peers.
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
The 21 shelf-stable food stocks we track reported a mixed Q2. As a group, revenues missed analysts’ consensus estimates by 0.7% while next quarter’s revenue guidance was 0.7% below.
After much suspense, the Federal Reserve cut its policy rate by 50bps (half a percent) in September 2024. This marks the central bank’s first easing of monetary policy since 2020 and the end of its most pointed inflation-busting campaign since the 1980s. Inflation had begun to run hot in 2021 post-COVID due to a confluence of factors such as supply chain disruptions, labor shortages, and stimulus spending. While CPI (inflation) readings have been supportive lately, employment measures have prompted some concern. Going forward, the markets will debate whether this rate cut (and more potential ones in 2024 and 2025) is perfect timing to support the economy or a bit too late for a macro that has already cooled too much.
Thankfully, shelf-stable food stocks have been resilient with share prices up 7.9% on average since the latest earnings results.
Utz (NYSE:UTZ) Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE:UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.
Utz reported revenues of $356.2 million, down 1.8% year on year. This print was in line with analysts’ expectations, and overall, it was a strong quarter for the company with an impressive beat of analysts’ operating margin and organic revenue growth estimates.
"I'm pleased with our continued strong momentum in the second quarter, as we gained dollar, pound, and unit share in the Salty Snack category for the third consecutive quarter. In addition, we delivered our sixth consecutive quarter of year-over-year Adjusted EBITDA Margin expansion, driven by strong Adjusted Gross Profit Margin growth, and we increased Adjusted Earnings per Share by 46%," said Howard Friedman, Chief Executive Officer of Utz.
Interestingly, the stock is up 19.1% since reporting and currently trades at $17.67.
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Best Q2: BellRing Brands (NYSE:BRBR) Spun out of Post (NYSE:POST) Holdings in 2019, Bellring Brands (NYSE:NYSE:BRBR) offers protein shakes, nutrition bars, and other products under the PowerBar, Premier Protein, and Dymatize brands.
BellRing Brands reported revenues of $515.4 million, up 15.6% year on year, outperforming analysts’ expectations by 2%. The business had an exceptional quarter with an impressive beat of analysts’ gross margin and organic revenue growth estimates.
The market seems happy with the results as the stock is up 22.3% since reporting. It currently trades at $60.39.
Weakest Q2: Lamb Weston (NYSE:LW) Best known for its Grown in Idaho brand, Lamb Weston (NYSE:LW) produces and distributes potato products such as frozen french fries and mashed potatoes.
Lamb Weston reported revenues of $1.61 billion, down 4.9% year on year, falling short of analysts’ expectations by 5.5%. It was a disappointing quarter as it posted underwhelming earnings guidance for the full year and a miss of analysts’ organic revenue growth estimates.
Lamb Weston delivered the weakest full-year guidance update in the group. As expected, the stock is down 18.4% since the results and currently trades at $64.11.
Kellanova (NYSE:K) With Corn Flakes as its first and most iconic product, Kellanova (NYSE:K) is a packaged foods company that is dominant in the cereal and snack categories.
Kellanova reported revenues of $3.19 billion, down 4.7% year on year. This result topped analysts’ expectations by 1.5%. It was a strong quarter as it also logged an impressive beat of analysts’ organic revenue growth estimates and a decent beat of analysts’ earnings estimates.
The stock is up 38.7% since reporting and currently trades at $80.64.
Hershey (NYSE:HSY) Best known for its milk chocolate bar and Hershey's Kisses, Hershey (NYSE:HSY) is an iconic company known for its chocolate products.
Hershey reported revenues of $2.07 billion, down 16.7% year on year. This number lagged analysts' expectations by 10.6%. It was a disappointing quarter as it also produced a miss of analysts’ organic revenue growth and earnings estimates.
Hershey had the weakest performance against analyst estimates and slowest revenue growth among its peers. The stock is down 3% since reporting and currently trades at $191.36.
This content was originally published on Stock Story
