What Happened?
Shares of snack food company Utz Brands (NYSE: UTZ) jumped 3.1% in the afternoon session after the company received a 'Buy' consensus rating from analysts, supported by a robust operational outlook.
The company anticipated an increase in volume-driven organic growth, helped by additional capacity from its Kings Mountain facility. This expansion was expected to boost its kettle snack business. Furthermore, the UTZ portfolio had seen positive metrics, including a 1.2 percentage point increase in household penetration year-over-year. The company also projected EBITDA growth of 6-10% and EPS growth of 10-15%. Broader market commentary suggested that the Consumer Staples sector, which includes companies like Utz, could benefit if an economic slowdown prompted a flight to safety among investors.
After the initial pop the shares cooled down to $9.64, up 2.9% from previous close.
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What Is The Market Telling Us
Utz’s shares are not very volatile and have had no moves greater than 5% over the last year.
The biggest move we wrote about over the last year was about 1 month ago when the stock dropped 13.8% on the news that its third-quarter earnings report revealed a steep drop in profitability that overshadowed a modest sales beat.
The company posted revenue of $377.8 million, up 3.4% year-over-year and slightly ahead of Wall Street's expectations, while its adjusted earnings per share of $0.23 met analyst forecasts. However, investors focused on the significant pressure on the company's margins. Utz's operating margin plummeted to just 0.9% from 5.3% in the same period last year, indicating that rising costs were eroding profits. Gross margin also declined by 2.3 percentage points year-over-year. The results suggested that while Utz was selling more snacks, it struggled to pass on higher expenses to its customers, raising concerns about its future earnings power.
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