On Tuesday, Benchmark lowered its price target on J&J Snack Foods (NASDAQ:JJSF) shares to $200 from $205, while maintaining a Buy rating on the stock. The adjustment was made in response to a weaker-than-expected performance in the movie theatre sector, which has affected J&J Snack Foods' revenue streams.
The movie theatre channel, which contributes approximately 15% to J&J Snack Foods' Food Service segment revenues and around 25% to its Frozen Beverage segment revenues, has experienced a downturn. This was attributed to a 27% drop in box office receipts in the second quarter of 2024, impacted by a strike that disrupted the film release schedule.
As a result, Benchmark has revised its financial projections for J&J Snack Foods' third fiscal quarter ending in June. The firm has reduced its estimates for revenue, adjusted EBITDA, and earnings per share (EPS) to reflect the softness in the movie theatre channel.
However, the estimates for the fourth fiscal quarter ending in September remain unchanged, based on expectations of a recovering box office in the second half of 2024, with a projected 9% decline in box office receipts for the September quarter.
Benchmark's price target adjustment to $200 is based on a 16 times forward EBITDA valuation, factoring in slightly reduced forecasts for J&J Snack Foods' fiscal year 2025 adjusted EBITDA. Despite the revisions, the firm continues to recommend a Buy rating on J&J Snack Foods shares.
In other recent news, J&J Snack Foods Corp. has made significant strides in its financial performance, with the company's CFO, Ken Plunk, announcing his retirement at the end of 2024.
This development comes alongside the company's strong second-quarter financial results for the fiscal year 2024. J&J Snack Foods reported record revenue of $360 million, a 7% increase year-over-year, surpassing the consensus estimate of $341 million.
Gross margins reached a robust 30.1%, exceeding consensus estimates by 220 basis points. Adjusted earnings per share stood at $0.84, a significant increase of 95% compared to the same quarter the previous year, notably outperforming the consensus estimate of $0.59.
Following these results, a Benchmark analyst raised the stock price target on J&J Snack Foods to $205 from the previous target of $195, while maintaining a Buy rating. The analyst cited these strong financial results as evidence of the successful operational improvements carried out by the management team over the past three years.
These improvements are expected to yield a more profitable operation with above-peer sales growth for J&J Snack Foods. In addition, the company's adjusted operating income and EBITDA saw substantial growth, with net earnings surging by over 90%. This growth was driven by significant performance in the Food Service and Retail segments.
InvestingPro Insights
Amidst the backdrop of Benchmark's revised financial outlook for J&J Snack Foods (NASDAQ:JJSF), insights from InvestingPro underscore some key metrics and tips that investors may find beneficial. J&J Snack Foods boasts a strong track record of raising its dividend, doing so for 21 consecutive years, which could appeal to income-focused investors. Moreover, the company's current P/E ratio stands at 37.12, which, when viewed alongside its near-term earnings growth, suggests that the stock is trading at a low P/E ratio relative to that growth. Additionally, the company's cash flows are robust enough to cover interest payments, indicating financial stability.
InvestingPro data also reveals that J&J Snack Foods has a market capitalization of $3.19 billion and has experienced a revenue growth of 7.34% over the last twelve months as of Q2 2024. Furthermore, the company's strong return over the last three months, with a price total return of 22.27%, could signal momentum that interests growth-oriented investors. For those considering adding J&J Snack Foods to their portfolio, InvestingPro offers more such tips and insights. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and discover the additional 9 InvestingPro Tips that could help inform your investment strategy.
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