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Coconut water company The Vita Coco Company (NASDAQ:COCO) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 3.2% year on year to $144.1 million. On the other hand, the company's full-year revenue guidance of $505 million at the midpoint came in slightly below analysts' estimates. It made a GAAP profit of $0.32 per share, improving from its profit of $0.31 per share in the same quarter last year.
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Vita Coco (COCO) Q2 CY2024 Highlights:
- Revenue: $144.1 million vs analyst estimates of $144.3 million (small miss)
- EPS: $0.32 vs analyst estimates of $0.29 (10.3% beat)
- The company reconfirmed its revenue guidance for the full year of $505 million at the midpoint
- Gross Margin (GAAP): 40.8%, up from 36.6% in the same quarter last year
- Free Cash Flow of $26.63 million is up from -$391,000 in the previous quarter
- Sales Volumes rose 4% year on year (19% in the same quarter last year)
- Market Capitalization: $1.40 billion
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ:COCO) offers coconut water products that are a natural way to quench thirst.
Beverages and AlcoholThese companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales GrowthVita Coco is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's annualized revenue growth rate of 14.4% over the last three years was solid for a consumer staples business.
This quarter, Vita Coco's revenue grew 3.2% year on year to $144.1 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 7.1% over the next 12 months, an acceleration from this quarter.
Volume Growth Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Vita Coco's average quarterly volume growth was a robust 7.6% over the last two years. This is good because meaningful volume growth is hard to come by in the stable consumer staples sector.
In Vita Coco's Q2 2024, sales volumes jumped 4% year on year. By the company's standards, this result was a meaningful deceleration from the 19% year-on-year increase it posted 12 months ago. We'll be watching Vita Coco closely to see if it can reaccelerate demand for its products.
Key Takeaways from Vita Coco's Q2 ResultsWe were impressed by how significantly Vita Coco blew past analysts' gross margin expectations this quarter. We were also glad its EPS outperformed Wall Street's estimates. On the other hand, its full-year revenue guidance was underwhelming. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock traded up 2% to $25.25 immediately following the results.
