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Category: Stock Market and Reynolds Consumer Products
Date: 9 May 2020 Stock Price: $33.57 We take a look at the 1st quarter earnings release of their 2020 fiscal year of Reynolds Consumer Products a consumer branded and private label products company with quarterly revenues topping over $730 million in 1Q 2020.
Despite the challenges of the COVID-19 global pandemic, we were still able to achieve a strong start to the year " |
About Reynolds Consumer Products
Reynolds Consumer Products is a market-leading consumer branded and private label products company with a presence in 95% of households across the United States. We produce and sell branded and store-brand products across three broad categories: cooking products, waste & storage products, and tableware. Flagship products include Reynolds Wrap® aluminum foil, Hefty® bags, and Hefty® party cup
Overview of Reynolds Consumer Products 1st quarter 2020 earnings report
The data below refers to the most recent quarter unless specified otherwise
- Total Revenues: $730 million (up from $665 million from the same quarter of the previous year)
- Revenue increased by 9.7% over the last 12 months
- Cost of sales: $541 million (up from $492 million for the same quarter of the previous year)
- Operating expenses increased by 9.9% over the last 12 months
- Some margin squeeze for Reynolds with their revenues growing at a faster rate than their operating costs
- Net earnings: $26 million (up from $17 million for the same quarter of the previous year)
- Diluted earnings per share: $0.14 (down from $0.11 for the same quarter of the previous year)
- PE ratio of Reynolds : 58.9
- Diluted weighted-average shares outstanding: 189 million (up from 155.5 million for the same quarter of the previous year)
- Cash and cash equivalents: $200 million
- Cash and cash equivalents per share: $1.05
- Cash and cash equivalents makes up 3.13% of Reynolds market capital
- Cash and cash equivalents makes up 4.4% of Reynolds total assets
- Inventories of Reynolds: $162.983 million
- Inventories makes up 3.1% of Reynolds total assets
- Accounts receivable: $316 million
- Trade receivable makes up 6.9% of Reynolds total assets
- Stockholders equity in Reynolds: $1.370 billion
- Stockholders equity per share in Reynolds: $7.24
- Reynolds is trading at 4.62 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- For perspective the average price to book value of firms in the S&P 500 is 3.34. Read more about the S&P500 here.
- Net cash used in operations: -$255 million
- Cash used in operations per share: -$1.37
Reynolds' management commentary on their 1st quarter 2020 earnings report
LAKE FOREST, Ill.--(BUSINESS WIRE)--May 7, 2020-- Reynolds Consumer Products Inc. (“Reynolds,” “RCP” or the “Company”), today reported results for the first quarter 2020 ended March 31, 2020.
“Despite the challenges of the COVID-19 global pandemic, we were still able to achieve a strong start to the year,” said Lance Mitchell, Reynolds Consumer Products President and Chief Executive Officer. “Our hearts go out to those who are directly or indirectly affected by the pandemic, the serious impacts of which we could not anticipate. Our ability to continue to operate as an essential business is a direct result of our safety culture and management teamwork.”
Mitchell continued, “RCP plant leaders were able to quickly implement procedures and processes that met or exceeded CDC guidelines in our operations to minimize risk, even ahead of state or local mandates. Updated attendance policies for essential workers have allowed flexibility for employees who may have been exposed to COVID-19 to stay home and self-isolate.”
“We quickly implemented a work from home policy for all employees who could do so, successfully transitioning nearly all functions remotely, including our Customer Service, Sales, and Supply Chain teams working with customers and suppliers to accommodate increased demand.”
“We are pleased to support our retail partners. They are continuing to serve the nation’s consumers by implementing additional safety precautions through challenging conditions. We thank them for leading the way as an example through this pandemic and providing essential products to consumers.”
“Despite the challenges of the COVID-19 global pandemic, we were still able to achieve a strong start to the year,” said Lance Mitchell, Reynolds Consumer Products President and Chief Executive Officer. “Our hearts go out to those who are directly or indirectly affected by the pandemic, the serious impacts of which we could not anticipate. Our ability to continue to operate as an essential business is a direct result of our safety culture and management teamwork.”
Mitchell continued, “RCP plant leaders were able to quickly implement procedures and processes that met or exceeded CDC guidelines in our operations to minimize risk, even ahead of state or local mandates. Updated attendance policies for essential workers have allowed flexibility for employees who may have been exposed to COVID-19 to stay home and self-isolate.”
“We quickly implemented a work from home policy for all employees who could do so, successfully transitioning nearly all functions remotely, including our Customer Service, Sales, and Supply Chain teams working with customers and suppliers to accommodate increased demand.”
“We are pleased to support our retail partners. They are continuing to serve the nation’s consumers by implementing additional safety precautions through challenging conditions. We thank them for leading the way as an example through this pandemic and providing essential products to consumers.”
Fiscal Year 2020 Outlook
Mitchell continued “Circumstances surrounding the unpredictability of COVID-19 continue to evolve, making it more difficult to predict the future with certainty. Increased consumer demand driven by changes in buying habits and incremental usage occasions has continued, but is dynamic and not yet normalized, and the current operating environment necessitates additional costs. We believe we are successfully managing and operating the Company during these challenging times and that we are positioned to grow stronger. We will continue to focus on what we can directly influence - keeping our employees safe and managing the business to ensure continued long term earnings growth for our shareholders.”
As a result of increased demand related to the COVID-19 pandemic and the anticipated benefit from lower interest rates, the Company has increased its guidance on all profit measures and reduced its Net Debt target. The Company has assumed the increased demand associated with COVID-19 will continue in the near-term, however, it expects COVID-19 operational-related cost increases to offset the impact of the increased demand resulting in its Adjusted EBITDA forecast for Q2 – Q4 2020 remaining in line with its previous guidance.
The Company acknowledges that the magnitude and duration of increased demand remains uncertain and that the greatest challenge it faces as a result of the pandemic is its ability to maintain the level of supply needed to keep up with the increased demand. The Company is taking steps to add capacity to address the increased demand through both staffing and capital investments. The outlook assumes that the Company can meet demand and that there are no significant disruptions to its operations, supply chain or retail partners for the remainder of fiscal 2020. The Company expects that the COVID-19 related volume increases in 2020 will make it more challenging to show year over year improvement in Adjusted EBITDA in 2021.
For the fiscal year ending December 31, 2020, the Company is providing the following updated guidance:
Mitchell continued “Circumstances surrounding the unpredictability of COVID-19 continue to evolve, making it more difficult to predict the future with certainty. Increased consumer demand driven by changes in buying habits and incremental usage occasions has continued, but is dynamic and not yet normalized, and the current operating environment necessitates additional costs. We believe we are successfully managing and operating the Company during these challenging times and that we are positioned to grow stronger. We will continue to focus on what we can directly influence - keeping our employees safe and managing the business to ensure continued long term earnings growth for our shareholders.”
As a result of increased demand related to the COVID-19 pandemic and the anticipated benefit from lower interest rates, the Company has increased its guidance on all profit measures and reduced its Net Debt target. The Company has assumed the increased demand associated with COVID-19 will continue in the near-term, however, it expects COVID-19 operational-related cost increases to offset the impact of the increased demand resulting in its Adjusted EBITDA forecast for Q2 – Q4 2020 remaining in line with its previous guidance.
The Company acknowledges that the magnitude and duration of increased demand remains uncertain and that the greatest challenge it faces as a result of the pandemic is its ability to maintain the level of supply needed to keep up with the increased demand. The Company is taking steps to add capacity to address the increased demand through both staffing and capital investments. The outlook assumes that the Company can meet demand and that there are no significant disruptions to its operations, supply chain or retail partners for the remainder of fiscal 2020. The Company expects that the COVID-19 related volume increases in 2020 will make it more challenging to show year over year improvement in Adjusted EBITDA in 2021.
For the fiscal year ending December 31, 2020, the Company is providing the following updated guidance:
- Net Income to be in the range of $335 million to $355 million
- Earnings Per Share to be in the range of $1.60 to $1.69 per share
- Adjusted EBITDA to be in the range of $695 million to $715 million1
- Adjusted Net Income to be in the range of $388 million to $403 million1
- Adjusted Earnings Per Share to be in the range of $1.85 to $1.92 per share1
- Net Debt to be in the range of $1.9 billion to $2.1 billion1
Reynolds Consumer Products (NASDAQ:REYN) stock price history
The image below, obtained from Google, shows the stock price history of Reynolds Consumer Products (NASDAQ: REYN) since their listing earlier this year. And it's been a pretty good time for Reynolds Consumer Products stockholders. At listing the stock of Reynolds Consumer Products was trading at around $28 a stock and its currently trading at $33.57. That's a strong return of 19.9% provided to Reynolds Consumer Products stockholders since their listing
Reynolds Consumer Products stock is trading at very close to its 52 week high of $35.50 and far away from its 52 week low of $21.61 which to us is a clear indication that the short term sentiment and momentum of Reynolds Consumer Products stock is very positive at this point in time.
Reynolds Consumer Products stock is trading at very close to its 52 week high of $35.50 and far away from its 52 week low of $21.61 which to us is a clear indication that the short term sentiment and momentum of Reynolds Consumer Products stock is very positive at this point in time.
Recent Google search trends for REYN stock price
The graphic below shows the Google search trends for REYN stock price over the last 12 months in the United States. As the graphic shows searches for REYN stock price pricked up early in the year as news of the stock's listing became available. Since then there has fairly volatile and erratic interest in the stock price of Reynolds
Recent coverage of Reynolds Consumer Products
The extract below shows recent coverage of Reynolds Consumer Products (NASDAQ:REYN) as obtained from Finance.yahoo.com
Read the full article here
Read the full article here
Reynolds Consumer Prodcts (NASDAQ: REYN) latest stock valuation
So based on Reynolds Consumer Products 1st quarter 2020 earnings report and their fiscal guidance/ outlook provide what do we value Reynolds Consumer Products stock at? Based on their earnings reported our valuation model provides a target price (full value price) for Reynolds Consumer Products at $27.30 per stock
We therefore believe that the stock of Reynolds Consumer Products stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $27.30. A good entry price into Reynolds Consumer Products stock would therefore be at $24.60 or below.
We expect the stock of Reynolds Consumer Products to pull back to levels closer to our target price in coming weeks and months.
We therefore believe that the stock of Reynolds Consumer Products stock is overvalued. We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price, which in this case is $27.30. A good entry price into Reynolds Consumer Products stock would therefore be at $24.60 or below.
We expect the stock of Reynolds Consumer Products to pull back to levels closer to our target price in coming weeks and months.
Next earnings release of Charles River Laboratories
It is expected that Reynolds Consumer Products (NASDAQ:REYN) will release their 2nd quarter 2020 earnings release in early August 2020