Stock Story -
Pet food company Freshpet (NASDAQ:FRPT) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 28.3% year on year to $235.3 million. The company expects the full year's revenue to be around $965 million, in line with analysts' estimates. It made a GAAP loss of $0.03 per share, improving from its loss of $0.35 per share in the same quarter last year.
Is now the time to buy Freshpet? Find out by reading the original article on StockStory, it's free.
Freshpet (FRPT) Q2 CY2024 Highlights:
- Revenue: $235.3 million vs analyst estimates of $231 million (1.8% beat)
- EPS: -$0.03 vs analyst expectations of -$0.04 (in line)
- The company lifted its revenue guidance for the full year from $950 million to $965 million at the midpoint, a 1.6% increase
- Gross Margin (GAAP): 39.9%, up from 32.3% in the same quarter last year
- Adjusted EBITDA Margin: 14.9%, up from 4.9% in the same quarter last year
- Free Cash Flow was -$5.91 million compared to -$41.07 million in the previous quarter
- Sales Volumes were up 28.3% year on year
- Market Capitalization: $5.91 billion
Contrasting itself with the typical processed pet foods found throughout the industry, Freshpet (NASDAQ:FRPT) is a pet food company whose product portfolio includes natural meals and treats for dogs and cats.
Perishable FoodThe perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.
Sales GrowthFreshpet is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 33.1% over the last three years was incredible for a consumer staples business.
This quarter, Freshpet reported remarkable year-on-year revenue growth of 28.3%, and its $235.3 million in revenue topped Wall Street estimates by 1.8%. Looking ahead, Wall Street expects sales to grow 22.7% over the next 12 months, a deceleration from this quarter.
Cash Is KingIf you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Freshpet's demanding reinvestments have drained its resources over the last two years. Its free cash flow margin was among the worst in the consumer staples sector, averaging negative 21.1%.
Taking a step back, an encouraging sign is that Freshpet's margin expanded by 20.5 percentage points during that time. In light of its glaring cash burn, however, this improvement is a bucket of hot water in a cold ocean.
Freshpet burned through $5.91 million of cash in Q2, equivalent to a negative 2.5% margin. The company's cash burn decreased meaningfully year on year while its free cash flow margin climbed 14.4 percentage points. This relationship shows Freshpet's management team brought in more revenue this quarter despite spending less cash - a mark of higher short-term efficiency.
Key Takeaways from Freshpet's Q2 Results It was good to see Freshpet beat analysts' EPS expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. That the company raised full year revenue guidance was icing on the cake. Overall, this was a good quarter for Freshpet. The stock traded up 3.1% to $125.95 immediately following the results.
![Freshpet's (NASDAQ:FRPT) Q2 Sales Top Estimates](https://d68-invdn-com.investing.com/content/picf3193220d0588644b14cfdf239f096be.jpeg)