Market News

Simply Good’s 1Q Sales Soar 52% Following Quest Acquisition; Jefferies Lifts PT

Simply Good Foods said revenue spiked 51.9% in its fiscal first quarter to $231.2 million year-over-year, boosted by strong sales at Quest Nutrition.

Simply Good’s (SMPL) 1Q sales also surpassed analysts’ expectations of $208.9 million. The food company announced that Quest Nutrition’s net sales increased by $78.7 million to $95.8 million and contributed nearly 51.7% to the company’s total 1Q revenue growth.

Meanwhile, Simply Good’s adjusted EPS increased by 31.8% to $0.29 year-on-year and beat the Street’s estimates of $0.20.

Buoyed by stronger-than-expected 1Q results, the company raised its first-half fiscal 2021 revenue and adjusted EBITDA outlook. Simply Good now projects net sales to generate between $455 million and $465 million, up from the previous guidance range of $425-$435 million.

The company’s adjusted EBITDA guidance range was lifted to $85-$90 million from an earlier projection of $77-$82 million. (See SMPL stock analysis on TipRanks)

Following the earnings release, Jefferies analyst Robert Dickerson hiked the stock’s price target to $36 (19.8% upside potential) from $27 and reiterated a Buy rating. Dickerson said that the company delivered better-than-expected results “despite ongoing pressure in its core categories.”

The analyst raised his EPS estimates for FY21, FY22, and FY23 citing “a higher probability of topline recovery and incremental deleverage due to cash positioning.” Dickerson further noted, “We cont. (continue) to favor the shares given COVID-recovery upside, delevered balance sheet, and positioning within the on-trend healthy snacks category.”

Like Dickerson, the rest of the Street maintains a bullish outlook on the stock. The Strong Buy analyst consensus is based on 4 unanimous Buys. Meanwhile, the average analyst price target of $31 implies 3.1% upside potential at current levels. Shares have returned 8.4% over the past year.

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