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Category: Stock Market and Farmer Brothers
Date: 11 September 2019 Stock Price: $14.00 We take a look at the 4th quarter earnings release of their 2019 fiscal year of Farmer Brothers, the manufacturer, wholesaler and distributor of high quality coffee.
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About Farmer Brothers
Farmer Bros. Co. is a leading manufacturer, wholesaler and distributor of a variety of high quality coffee products and a distributor of tea and culinary products to food service establishments and retailers nationwide. Our customers include restaurants, hotels, casinos, offices, quick service restaurants ("QSR's"), convenience stores, healthcare facilities and other foodservice providers, as well as private brand retailers in the QSR, grocery, drugstore, restaurant, convenience store, and independent coffee house channels.
Our mission is to "sell great coffee, tea and culinary products and provide superior service—one customer at a time." We reach our customers in two ways: through our nationwide Direct-Store-Delivery ("DSD") network of approximately 470 delivery routes, 111 branch warehouses and five distribution centers, and by using the distribution channels of our national retail and institutional customers.
To meet our customers' needs we carry approximately 2,700 products (excluding private label) including roasted coffee, liquid coffee, coffee related products such as coffee filters, sugar and creamers, assorted teas, cappuccino, cocoa, spices, gelatins and puddings, soup, salad dressings, pancake and biscuit mixes, and jellies and preserves. Approximately 50% of our total sales is from roasted coffee products.
We purchase, roast and package coffee at our Portland, Oregon; and Houston, Texas plants. We distribute to our branches nationwide from the Torrance, Houston and Portland plants, and from our distribution centers in Oklahoma, Illinois and New Jersey.
We differentiate ourselves in the marketplace through our customer service model. We offer value added services including beverage equipment service, menu solutions, wherein we recommend products, how these products are prepared in the kitchen and presented on the menu, and hassle-free inventory and product procurement management to our foodservice customers. These services are conducted primarily in person through Regional Sales Representatives, or RSR’s, who develop personal relationships with chefs, restaurant owners and food buyers at their drop off locations. We also provide comprehensive coffee programs, including private brand development, green coffee procurement, category management, and supply chain management to our national retail customers.
We manufacture and distribute products under our own brands, as well as under private labels on behalf of certain customers. Our branded products are sold primarily into the foodservice channel, and are comprised of both national and regional brands. National foodservice brands include Farmer Brothers®, The Artisan Collection by Farmer Brothers™, Superior®, Metropolitan™ and Island Medley Iced Tea®. Regional foodservice and retail brands include Cain's®, Ireland® and McGarvey®.
Below Farmer Brothers view on the world of Coffee.
Our mission is to "sell great coffee, tea and culinary products and provide superior service—one customer at a time." We reach our customers in two ways: through our nationwide Direct-Store-Delivery ("DSD") network of approximately 470 delivery routes, 111 branch warehouses and five distribution centers, and by using the distribution channels of our national retail and institutional customers.
To meet our customers' needs we carry approximately 2,700 products (excluding private label) including roasted coffee, liquid coffee, coffee related products such as coffee filters, sugar and creamers, assorted teas, cappuccino, cocoa, spices, gelatins and puddings, soup, salad dressings, pancake and biscuit mixes, and jellies and preserves. Approximately 50% of our total sales is from roasted coffee products.
We purchase, roast and package coffee at our Portland, Oregon; and Houston, Texas plants. We distribute to our branches nationwide from the Torrance, Houston and Portland plants, and from our distribution centers in Oklahoma, Illinois and New Jersey.
We differentiate ourselves in the marketplace through our customer service model. We offer value added services including beverage equipment service, menu solutions, wherein we recommend products, how these products are prepared in the kitchen and presented on the menu, and hassle-free inventory and product procurement management to our foodservice customers. These services are conducted primarily in person through Regional Sales Representatives, or RSR’s, who develop personal relationships with chefs, restaurant owners and food buyers at their drop off locations. We also provide comprehensive coffee programs, including private brand development, green coffee procurement, category management, and supply chain management to our national retail customers.
We manufacture and distribute products under our own brands, as well as under private labels on behalf of certain customers. Our branded products are sold primarily into the foodservice channel, and are comprised of both national and regional brands. National foodservice brands include Farmer Brothers®, The Artisan Collection by Farmer Brothers™, Superior®, Metropolitan™ and Island Medley Iced Tea®. Regional foodservice and retail brands include Cain's®, Ireland® and McGarvey®.
Below Farmer Brothers view on the world of Coffee.
Financial overview of Farmer Brothers' latest earnings report
The numbers we are interested in (for the quarter):
- Net sales $142.050 million (down from $149.538 million from the same quarter of the previous year)
- Cost of sales: $104.327 million (up from $96.806 million for the same quarter of the previous year)
- Net income/loss: -$7.024 million (down from $1.984 million for the same quarter of the previous year)
- Diluted earnings per share: -$0.52 (down from -$0.00 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 17.038 million (up from 16.855 million for the same quarter of the previous year)
- Cash and cash equivalents: $6.983 million
- Cash and cash equivalents per share: $0.41
- Cash and cash equivalents makes up 2.9% of Farmer Brothers' market capital
- Cash and cash equivalents makes up 1.64% of Farmer Brothers' total assets
- Accounts receivable: $55.155 million
- Accounts receivable makes up 12.92% of Farmer Brothers' total assets
- Inventories: $87.910 million
- Inventories makes up 20.7% of Farmer Brothers' total assets
- Total shareholders' equity of Farmer Brothers: $157.494 million
- Shareholders' equity per share: $9.24
- So Farmer Brothers is trading at 1.51 times the stockholders equity per share
Farmer Brothers' management commentary on the results and earnings guidance
NORTHLAKE, Texas, Sept. 10, 2019 (GLOBE NEWSWIRE) -- Farmer Bros. Co. (NASDAQ: FARM) (the “Company”) today reported financial results for its fourth quarter and fiscal year ended June 30, 2019.
Fourth Quarter Fiscal 2019 Highlights:
“During the fourth quarter and entering fiscal 2020, we took significant steps to address recent issues in the business and put the Company back on a path of improved financial results,” said Chris Mottern, Interim CEO. “With strategic intent and contributions from across the Company, we developed five key priorities that the team is executing against with urgency. These priorities are: effective cash management and debt reduction; customer retention and acquisition; efficiently managing coffee brewing equipment, installation and service; enhancing processes and systems; and reducing our SKU counts, and achieving 100% product availability. We entered the new fiscal year in a stronger financial position and have formed a solid foundation on which the Company will be able to stabilize, move forward with momentum and be positioned for long-term success.”
Mr. Mottern, continued, “As announced separately today, we have appointed Deverl Maserang as CEO and look forward to him joining the Company later this month. With more than three decades of innovative leadership in turnarounds, supply chain management expertise, along with deep experience in the food and beverage industry, we believe he is the ideal executive to lead Farmer Brothers into its next stage of growth in the future. The Company remains committed to improving execution and new business generation, with the goal to deliver enhanced value to shareholders.”
Fourth Quarter Fiscal 2019 Highlights:
- Volume of green coffee processed and sold was flat at 27.4 million pounds compared to the prior year period.
- Green coffee pounds processed and sold through our DSD network were 8.9 million, or 32.4% of total green coffee pounds processed and sold
- Direct ship customers represented 18.2 million, or 66.5%, of total green coffee pounds processed and sold
- Distributor customers represented 0.3 million pounds, or 1.1%, of total green coffee pounds processed and sold
- Net sales were $142.1 million, a decrease of $7.5 million, or 5.0%, from the prior year period;
- Gross margin decreased to 26.6% from 35.3% in the prior year period, while operating expenses as percentage of sales improved to 31.5% from 33.9% in the prior year period;
- Net loss was $8.8 million compared to net income of $0.1 million in the prior year period; and
- Adjusted EBITDA was $3.9 million compared to $14.0 million in the prior year period.
“During the fourth quarter and entering fiscal 2020, we took significant steps to address recent issues in the business and put the Company back on a path of improved financial results,” said Chris Mottern, Interim CEO. “With strategic intent and contributions from across the Company, we developed five key priorities that the team is executing against with urgency. These priorities are: effective cash management and debt reduction; customer retention and acquisition; efficiently managing coffee brewing equipment, installation and service; enhancing processes and systems; and reducing our SKU counts, and achieving 100% product availability. We entered the new fiscal year in a stronger financial position and have formed a solid foundation on which the Company will be able to stabilize, move forward with momentum and be positioned for long-term success.”
Mr. Mottern, continued, “As announced separately today, we have appointed Deverl Maserang as CEO and look forward to him joining the Company later this month. With more than three decades of innovative leadership in turnarounds, supply chain management expertise, along with deep experience in the food and beverage industry, we believe he is the ideal executive to lead Farmer Brothers into its next stage of growth in the future. The Company remains committed to improving execution and new business generation, with the goal to deliver enhanced value to shareholders.”
Farmer Brothers (NASDAQ: FARM) stock price history
The image below, obtained from Google shows the stock price history of Farmer Brothers over the last 5 years. And its not been a particularly good time for stockholders of Farmer Brothers, with the stock sliding almost consistently from the highs it reached in the middle of 2017. Over the past 5 years the group's stock price has declined by -39.1%. And the bad news doesn't stop there.
The image below, also obtained from Google shows the stock price performance of Farmer Brothers over the last trading day including after market activity on the stock. And as it shows there has been a significantly decline in the stock in after market trading following the release of the group's latest earnings numbers. The stock price of Farmer Brothers declined by -20.71% in after market trade following the release of their latest earnings report.
Recent coverage of Farmer Brothers
Below an extract of an article covering Farm Brothers obtained from Zacks. And the group was dubbed the bear of the day by Zacks.
Farmer Brothers Company (FARM ) is a Zacks Rank #5 (Strong Sell) and it has F's for the Value and Growth Style Scores. That alone should give you pause, but now, this stock is the bear of the day. Let's take a look at why this stock fell to the lowest Zacks Rank.
Description
Farmer Bros. Co. is in the business of roasting, packaging and distributing coffee and allied products to restaurants, hotels, hospitals, convenience stores and fast food outlets. The company's primary raw material is green coffee. Green coffee is purchased through domestic commodity brokers. Coffee is an agricultural commodity, and is subject to fluctuations of both price and supply.
Recent Earnings
FARM recently reported earnings and missed the Zacks Consensus Estimate. I see a loss of 27 cents for the quarter when a gain of 9 cents was expected. That is a huge miss and good for a negative 400% earnings surprise.
The full original article can be found here
Farmer Brothers Company (FARM ) is a Zacks Rank #5 (Strong Sell) and it has F's for the Value and Growth Style Scores. That alone should give you pause, but now, this stock is the bear of the day. Let's take a look at why this stock fell to the lowest Zacks Rank.
Description
Farmer Bros. Co. is in the business of roasting, packaging and distributing coffee and allied products to restaurants, hotels, hospitals, convenience stores and fast food outlets. The company's primary raw material is green coffee. Green coffee is purchased through domestic commodity brokers. Coffee is an agricultural commodity, and is subject to fluctuations of both price and supply.
Recent Earnings
FARM recently reported earnings and missed the Zacks Consensus Estimate. I see a loss of 27 cents for the quarter when a gain of 9 cents was expected. That is a huge miss and good for a negative 400% earnings surprise.
The full original article can be found here
Farmer Brothers (NASDAQ: FARM) latest stock valuation
So the stock was punished hard in after market trade after the release of their latest earnings report, and Zacks' called the stock their Bear of the Day following their earnings release. So what is the stock of Farmer Brother actually worth? Or is it even worth anything? It is very hard to value a stock that makes a loss and has negative cash flows. When there are such cases we tend to look at the stockholders equity per share as our base valuation. Essentially this shows that if the group sells all its assets, pays off all its liabilities and distributes what is left to stockholders, this is the amount each stockholder will receive (assuming all assets could be sold at its value as reflected on the balance sheet).
Our target (full value) price for Farmer Brothers is therefore $9.24 which is their stockholders equity per share. We also believe the market was warranted in punishing the group's stock following their earnings release and we predict further weakness in Farmer Brothers stock price and expect it to settle in the low $9's in coming weeks and months.
Our target (full value) price for Farmer Brothers is therefore $9.24 which is their stockholders equity per share. We also believe the market was warranted in punishing the group's stock following their earnings release and we predict further weakness in Farmer Brothers stock price and expect it to settle in the low $9's in coming weeks and months.