Why Freshpet’s stock was skyrocketing today

What happened

Shares of Freshpet (NASDAQ:FRPT) rose today after the fresh pet food maker released strong results in its fourth-quarter earnings report and offered a better-than-expected guidance for 2022 despite supply chain challenges.

As of 1:16 p.m. ET, the stock was up 14.8%.

Image source: Getty Images.

So what

Freshpet said revenue for the quarter rose 37.1% to $115.9 million, in line with estimates. Management credited “speed, distribution gains and innovation” for the strong growth, which means it’s attracting new retail partners and accelerating shipments.

Adjusted gross margin fell from 45.8% to 41.7% due to higher salaries, cost inflation and investments in increased capacity.

Selling, general and administrative expenses also increased by 46% due to higher transportation costs and advertising expenses. As a result, its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) went from $12.9 million to $9.7 million. Ultimately, it reported a generally accepted accounting principles (GAAP) loss per share of $0.21, down from a loss per share of $0.08 in the year-ago quarter, and worse than consensus with a loss per share of $0.16. .

Touting the company’s recent investments, CEO Billy Cyr said:

We finally have the capacity to support Freshpet’s significant revenue growth potential, while improving the reliability of our operations. Over the past two years, we’ve invested in significant new capabilities and the talent needed to support them. We plan to use this capacity wisely, budgeting prudently to ensure the reliability of our operations in an uncertain environment, but also planning aggressively to maximize our growth potential.

Now what

What seemed to trigger the stock’s gains today was advice from Freshpet. The company actually expects revenue growth to accelerate from 33.5% to at least 35% growth this year, and claims at least $575 million in revenue. That was ahead of Wall Street estimates at $562.4 million. It also sees adjusted EBITDA above $55 million, implying a 28% or better increase from 2022.

Freshpet has been a reliable growth stock in the recession-proof pet products industry because its fresh and refrigerated food sales model sets it apart from its competitors. With the stock down 40% from its peak nearly a year ago, the upside potential is much clearer here.

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Jeremy Bowman has no position in the stocks mentioned. The Motley Fool owns 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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