MGP Ingredients (NASDAQ:MGPI) Posts Better-Than-Expected Sales In Q4 But Stock Drops

February 26, 2025 at 08:28 AM EST

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Food and beverage supplier MGP Ingredients (NASDAQ: MGPI) reported revenue ahead of Wall Street’s expectations in Q4 CY2024, but sales fell by 15.9% year on year to $180.8 million. On the other hand, the company’s full-year revenue guidance of $530 million at the midpoint came in 10.6% below analysts’ estimates. Its non-GAAP profit of $1.57 per share was 4.4% above analysts’ consensus estimates.

Is now the time to buy MGP Ingredients? Find out by accessing our full research report, it’s free.

MGP Ingredients (MGPI) Q4 CY2024 Highlights:

Revenue: $180.8 million vs analyst estimates of $176.7 million (15.9% year-on-year decline, 2.3% beat)
Adjusted EPS: $1.57 vs analyst estimates of $1.50 (4.4% beat)
Adjusted EBITDA: $53.08 million vs analyst estimates of $53.94 million (29.4% margin, 1.6% miss)
Management’s revenue guidance for the upcoming financial year 2025 is $530 million at the midpoint, missing analyst estimates by 10.6% and implying -24.7% growth (vs -15.9% in FY2024)
Adjusted EPS guidance for the upcoming financial year 2025 is $2.60 at the midpoint, missing analyst estimates by 25%
EBITDA guidance for the upcoming financial year 2025 is $110 million at the midpoint, below analyst estimates of $138 million
Operating Margin: -16.8%, down from 20% in the same quarter last year
Free Cash Flow Margin: 5.8%, down from 10.2% in the same quarter last year
Market Capitalization: $715.5 million

Company Overview

Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry

Beverages, Alcohol, and Tobacco

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the rise of cannabis, craft beer, and vaping or the steady decline of soda and cigarettes. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Sales Growth

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.

With $703.6 million in revenue over the past 12 months, MGP Ingredients is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers.

As you can see below, MGP Ingredients grew its sales at a sluggish 3.9% compounded annual growth rate over the last three years. This shows it failed to generate demand in any major way and is a rough starting point for our analysis.

This quarter, MGP Ingredients’s revenue fell by 15.9% year on year to $180.8 million but beat Wall Street’s estimates by 2.3%.

Looking ahead, sell-side analysts expect revenue to decline by 16.5% over the next 12 months, a deceleration versus the last three years. This projection doesn't excite us and suggests its products will see some demand headwinds.

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Cash Is King

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

MGP Ingredients has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.9%, subpar for a consumer staples business.

Taking a step back, an encouraging sign is that MGP Ingredients’s margin expanded by 1 percentage points over the last year. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

MGP Ingredients Trailing 12-Month Free Cash Flow Margin

MGP Ingredients’s free cash flow clocked in at $10.44 million in Q4, equivalent to a 5.8% margin. The company’s cash profitability regressed as it was 4.5 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, causing short-term swings. Long-term trends carry greater meaning.

Key Takeaways from MGP Ingredients’s Q4 Results

It was encouraging to see MGP Ingredients beat analysts’ revenue expectations this quarter. We were also happy its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance missed significantly and its full-year EBITDA guidance fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 8.1% to $30 immediately after reporting.

MGP Ingredients didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.

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