Freshpet (FRPT) recorded a wider-than-expected loss in the second quarter, impacted by a rise in selling, general and administrative expenses, but partly mitigated by a rise in net sales and high gross profit. Despite the disappointment, revenues still beat analysts’ expectations.
The per food company incurred a loss of $0.17 per share in Q2, compared to earnings of $0.00 per share during the same quarter last year. Analysts had expected the company to report a loss of $0.04 per share.
Adjusted EBITDA in Q2 declined 2.7% to $10.9 million year-over-year. Furthermore, SG&A expenses escalated 47.2% to $49.6 million. (See Freshpet stock charts on TipRanks)
On the positive side, net sales jumped 35.8% to $108.6 million year-over-year, and beat analysts’ estimates of $106.08 million. Sales during the reported quarter were driven by velocity, distribution gains, and innovation.
Additionally, gross profit came in at $43.1 million, up 27.1% year-over-year.
Speaking about the earnings release, Freshpet CEO Billy Cyr said, “The acceleration of Freshpet’s second quarter growth rate continues to demonstrate the significant potential of the brand and the potency of our Feed the Growth strategy – enabling us to raise our projection for this year’s net sales growth rate to 40%.”
For 2021, the company projects revised net sales of $445 million (up from the prior $430 million), versus the consensus of $433.5 million. Adjusted EBITDA is expected to exceed $61 million.
Recently, Robert W. Baird analyst Peter Benedict maintained a Buy rating and a price target of $210 (46.5% upside potential) on the stock.
Benedict expects Freshpet to record a loss per share of $0.26 in the third quarter of this year.
On July 21, Oppenheimer analyst Rupesh Parikh maintained a Buy rating and a price target of $200 (39.5% upside potential) on the stock.
Parikh believes “FRPT shares have largely de-risked and would take advantage of the recent pullback.”
Looking forward to 2H21, the analyst reduced adjusted EBITDA forecasts “to reflect increased freight and packaging cost headwinds.”
The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating. That’s based on 6 Buys, 2 Holds, and 1 Sell. The average Freshpet price target of $193.22 implies 34.8% upside potential to current levels. Shares have increased 36.8% over the past year.
Investors should always be aware of the risks involved in any stock. According to the new TipRanks’ Risk Factors tool, the FRPT stock is at risk mainly from two factors: Finance and Corporate, and Production, which contribute 27% and 19%, respectively, to the total risk for the stock. Within the Finance and Corporate risk category, Freshpet has 10 risks.
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