Simply Good Foods, the company responsible for Atkins-branded snacks, announced higher than predicted third-quarter earnings Thursday, but expects increased inventory to dampen fourth-quarter growth. SMPL stock tumbled.
Simply Good Foods Earnings
Estimates: Wall Street predicted Simply Good Foods earnings per share of 35 cents in the third quarter, down 19% vs. a year earlier. FactSet analysts see sales coming in at $294.1 million, a 3.6% year-over-year increase.
Results: The company reported EPS rose 2% to 44 cents. Sales increased by 11% to $316.5 million.
Outlook: In the wake of Q3 sales beat, Simply Good Foods expects revenue to increase 14%-15% for the full fiscal year. This is up from the company's previous forecast of 13-15%. Adjusted EBITDA is predicted to increase slightly less than the sales growth rate. SMPL also believes earnings per share will increase above previous forecasts.
With elevated inventory levels, Simply Good Foods expects its fourth-quarter net sales to underperform compared to last year. This will result in second half of the year retail takeaway of low double digits, in line with previous estimates, according to the company.
"We have good visibility into our cost structure and there is no change to our fiscal 2022 supply chain cost inflation and gross margin outlook," CEO Joseph Scalzo said in the news release.
"We're confident in the strength of our business and diversification of our portfolio across brands, forms, customers and channels that provide us with multiple ways to win in the marketplace and deliver shareholder value," he added.
The Denver-based company primarily develops low-carb snacks, protein bars, ready-to-drink shakes and a line of confectionery goods under the brand names Atkins and Quest. So far, Simply Good Foods has successfully navigated rising ingredient costs and supply-chain concerns.
The company increased product prices last September and has already announced a second hike will come in the fourth quarter. Simply Good Foods has also reported it has covered 90% of ingredient costs for the fiscal year, making it highly unlikely that rising costs will impact margins in 2022.
Simply Good Foods reported earnings of $0.36 a share in the second quarter, a 44% jump. That was its fourth straight quarter with a year-over-year increase of more than 40%. Sales grew 29% to $297 million.
SMPL Stock
Stephens analyst Ben Bienvenu earlier this week upgraded Simply Good Foods to overweight. Bienvenu increased the price target by $1 to $45.
SMPL stock fell 8.3% to 37.77 at the close of Thursday's market trading, tumbling below its 50-day line and testing its 200-day. The stock closed Wednesday up 2%, working on a 45.87 buy point.
The company is demonstrating "stable growth in a volatile market" and is benefiting from increased consumer interest in snacking, according to the analyst's note.
The company has a 99 Composite Rating and sits atop the Food-Confectionery industry group. Hershey and Tootsie Roll Industries are also among that group's highest-rated stocks.
SMPL stock's Relative Strength Rating is 94 out of a best-possible 99. The RS Rating is a key analysis that shows SMPL stock is outperforming more than 90% of all stocks in terms of price appreciation. Simply Good Foods also has a 97 EPS Rating, demonstrating strong recent quarters and years profit growth.
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