Analyst Robert Moskow from TD Cowen maintained a Hold rating on UTZ Brands and decreased the price target to $12.00 from $14.00.
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Robert Moskow has given his Hold rating due to a combination of factors impacting UTZ Brands. The company has shown strong sales growth, exceeding expectations with a 3.4% organic growth rate, driven by increased volume and mix. However, despite these positive sales figures, UTZ Brands has faced challenges in maintaining its gross margin, which fell short due to unfavorable weather affecting potato yields. Additionally, the company’s recent acquisition of direct-store-delivery routes in California, while strategically beneficial for market expansion, is expected to incur upfront costs that could pressure EBITDA margins in the near term.
Another reason for the Hold rating is the investor concern over the lack of profit upside, despite UTZ Brands’ solid top-line performance. The management’s warning about potential headcount and warehouse investments in California, which may impact EBITDA margins, adds to this cautious outlook. Furthermore, the company’s focus on improving free cash flow and balance sheet positioning, while necessary, indicates a period of financial adjustment as they complete their supply chain transformation and exit peak capital expenditures. These elements combined suggest a balanced view of the company’s future prospects, justifying the Hold rating.
Moskow covers the Consumer Defensive sector, focusing on stocks such as Kraft Heinz, Clorox, and McCormick & Company. According to TipRanks, Moskow has an average return of 3.2% and a 46.44% success rate on recommended stocks.
In another report released on October 20, UBS also maintained a Hold rating on the stock with a $13.50 price target.