Stock Story -
Egg and butter company Vital Farms (NASDAQ:VITL) reported Q2 CY2024 results topping analysts' expectations, with revenue up 38.5% year on year to $147.4 million. The company's full-year revenue guidance of $590 million at the midpoint also came in slightly above analysts' estimates. It made a GAAP profit of $0.36 per share, improving from its profit of $0.15 per share in the same quarter last year.
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Vital Farms (VITL) Q2 CY2024 Highlights:
- Revenue: $147.4 million vs analyst estimates of $138.4 million (6.5% beat)
- EPS: $0.36 vs analyst estimates of $0.20 ($0.16 beat)
- The company lifted its revenue guidance for the full year from $575 million to $590 million at the midpoint, a 2.6% increase
- EBITDA guidance for the full year is $75 million at the midpoint, below analyst estimates of $75.4 million
- Gross Margin (GAAP): 39.1%, up from 35.5% in the same quarter last year
- EBITDA Margin: 15.8%, up from 10.7% in the same quarter last year
- Free Cash Flow of $10.54 million, down 53.4% from the previous quarter
- Sales Volumes rose 35.8% year on year (6% in the same quarter last year)
- Market Capitalization: $1.46 billion
With an emphasis on ethically produced products, Vital Farms (NASDAQ:NATR) specializes in pasture-raised eggs and butter.
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 GrowthVital Farms 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 33.8% over the last three years was incredible for a consumer staples business.
This quarter, Vital Farms reported wonderful year-on-year revenue growth of 38.5%, and its $147.4 million in revenue exceeded Wall Street's estimates by 6.5%. Looking ahead, Wall Street expects sales to grow 17.8% over the next 12 months, a deceleration 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.
Vital Farms's average quarterly volume growth of 20.7% over the last two years has beaten the competition by a long shot. This is great because companies with significant volume growth are needles in a haystack in the stable consumer staples sector.
In Vital Farms's Q2 2024, sales volumes jumped 35.8% year on year. This result was an acceleration from the 6% year-on-year increase it posted 12 months ago, certainly a positive signal.
Key Takeaways from Vital Farms's Q2 ResultsWe were impressed by how significantly Vital Farms blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 4.5% to $36.30 immediately after reporting.
