Why Freshpet Stock was tumbling today


What happened

Actions of Freshpet (NASDAQ: FRPT) were in the niche today after the fresh pet food maker missed the mark in its third quarter earnings report. Supply chain challenges and labor shortages weighed on the company’s performance, and Freshpet lowered its forecast for the full year.

As of 2:48 p.m. EST, the stock was down 15.6%.

Image source: Getty Images.

So what

Despite the challenges, Freshpet has always recorded strong growth in turnover; it just wasn’t enough to make this high-priced stock appeal to Wall Street.

Revenue rose 27.8% to $ 107.6 million, which is lower than analyst consensus at $ 115.5 million. Salary increases, rising ingredient costs and investments all weighed on the gross margin, which fell from 43.5% to 38.6%. As a result, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) increased from $ 17 million to $ 14.6 million. Based on GAAP, the company reported a loss of $ 0.05 per share, compared to earnings estimates of $ 0.07 per share.

CEO Billy Cyr said, “Despite unprecedented supply chain challenges, Freshpet’s long-term growth model remains intact. our costs faster than expected, resulting in short-term challenges for us. “

Now what

For the full year, the company reduced its forecast to 40% revenue growth to around $ 445 million from previous expectations of at least $ 445 million. He now expects a 7% increase in Adjusted EBITDA to $ 50 million, below previous guidance of around $ 61 million, as ongoing supply chain issues are expected to impact the society.

Investors should be aware that these are short-term challenges to the performance of the company rather than structural deficiencies. It’s not usual to see high priced stocks chopped like this when they run out of estimates, but Freshpet continues to grow rapidly and the growth plan is solid.

Cyr added: “The long-term trends driving Freshpet’s growth remain strong and, thanks to our aggressive capacity expansion initiatives and the investments we have made in maintenance, training and automation in the third quarter, we were never better positioned to fulfill our mission. of “changing the way people feed their pets forever” than we are today. ”

The wider tailwinds in the pet industry always favor the stock.

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Jeremy Bowman has no position in the stocks mentioned. The Motley Fool owns shares and recommends Freshpet. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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