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Category: Stock Market and Tootsie Roll Industries
Date: 7 October 2019 Stock Price: $36.75 We take a look at the 2nd quarter earnings report of their 2019 fiscal year of Tootsie Roll Industries a manufacturer of confectionery products whose brands include Tootsie Roll, Caramel Apple Pops and Blue Razz
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About Tootsie Roll Industries
Tootsie Roll Industries, Inc. has been engaged in the manufacture and sale of confectionery products for over 120 years. Our products are primarily sold under the familiar brand names: Tootsie Roll, Tootsie Roll Pops, Caramel Apple Pops, Child’s Play, Charms, Blow Pop, Blue Razz, Cella’s chocolate covered cherries, Dots, Crows, Junior Mints, Junior Caramels, Charleston Chew, Sugar Daddy, Sugar Babies, Andes, Fluffy Stuff cotton candy, Dubble Bubble, Razzles, Cry Baby and Nik-L-Nip.
Overview of Tootsie Roll Industries' latest earnings report
- Total Revenues: $106.952 million (up from $106.809 million for the same quarter of the previous year)
- Total Revenues increased by 0.14% over the last 12 months
- Total costs: $66.221 million (down from $67.689 million for the same quarter of the previous year)
- Total costs decreased by -2.16% over the last 12 months
- Net income: $11.556 million (up from $10.489 million for the same quarter of the previous year)
- Diluted earnings per share: $0.18 (up from $0.16 for the same quarter of the previous year)
- PE ratio: 51
- Dividend declared: $0.09
- Dividend yield: 0.97%
- Diluted weighted-average shares outstanding: 65.559 million (down from 66.104 million for the same quarter of the previous year)
- Cash and cash equivalents: $57.857 million
- Cash and cash equivalents per share: $0.88
- Cash and cash equivalents makes up 2.4% of Tootsie Roll's market capital
- Cash and cash equivalents makes up 6.1% of Tootsie Roll's total assets
- Accounts receivable: $36.824 million
- Accounts receivable makes up 3.88% of Tootsie Roll's total assets
- Goodwill: $73.237 million
- Goodwill makes up 7.72% of Tootsie Roll's total assets
- Cash generated from operations (for 6 months): $11.02 million
- Cash generated from operations per share (for 6 months): $0.16
- Stockholders equity of Tootsie Roll's : $742.645 million
- Stockholders equity per share: $11.32
- So Tootsie Roll Industries is trading at 3.24 times its stockholders equity which is within the expected range of between 2 and 4 times that most firms tend to trade at.
Tootsie Roll Industries' management commentary on the results and business outlook
CHICAGO, ILLINOIS – July 24, 2019 - Ellen R. Gordon, Chairman, Tootsie Roll Industries, Inc. reported second quarter and first half 2019 net sales and net earnings.
Mrs. Gordon said, “Second quarter and first half 2019 net sales include increases in domestic sales of approximately 2% and 1%, respectively. Lower foreign sales adversely affected reported consolidated sales in both second quarter and first half 2019 compared to the corresponding periods in 2018. Foreign sales were unfavorably impacted by the timing of certain sales in the comparative periods as well as a stronger U.S. dollar and the related translation of foreign sales. Second quarter and first half 2019 net earnings benefited from higher price realization which allowed the Company to recover some product margin decline resulting from increasing input costs. Less favorable foreign exchange adversely affected results in both second quarter and first half 2019 compared to the prior year corresponding periods, however, decreases in legal and professional fees contributed to the improved results in second quarter and first half 2019.
The Company is continuing its investments in its plant manufacturing operations to meet new consumer and customer demands, achieve quality improvements, and increase operational efficiencies. Plant efficiencies driven by capital investments and ongoing cost containment programs contributed to the improved results discussed above. The prior year 2018 results were adversely affected by the implementation and start-up of new manufacturing packaging lines and resulting operational inefficiencies as well as unfavorable experience from Company self-insurance programs.
The Company’s effective income tax rate was 25.8% and 23.7% in second quarter 2019 and 2018, respectively, and 25.2% and 22.9% in first half 2019 and 2018, respectively. These higher tax rates in 2019 principally reflect higher state and foreign income tax expense, including the effects of certain international tax provisions relating to U.S. tax reform legislation that became effective at the beginning of 2018. Earnings per share benefited from stock purchases in the open market resulting in fewer shares outstanding in both second quarter and first half 2019.”
Mrs. Gordon said, “Second quarter and first half 2019 net sales include increases in domestic sales of approximately 2% and 1%, respectively. Lower foreign sales adversely affected reported consolidated sales in both second quarter and first half 2019 compared to the corresponding periods in 2018. Foreign sales were unfavorably impacted by the timing of certain sales in the comparative periods as well as a stronger U.S. dollar and the related translation of foreign sales. Second quarter and first half 2019 net earnings benefited from higher price realization which allowed the Company to recover some product margin decline resulting from increasing input costs. Less favorable foreign exchange adversely affected results in both second quarter and first half 2019 compared to the prior year corresponding periods, however, decreases in legal and professional fees contributed to the improved results in second quarter and first half 2019.
The Company is continuing its investments in its plant manufacturing operations to meet new consumer and customer demands, achieve quality improvements, and increase operational efficiencies. Plant efficiencies driven by capital investments and ongoing cost containment programs contributed to the improved results discussed above. The prior year 2018 results were adversely affected by the implementation and start-up of new manufacturing packaging lines and resulting operational inefficiencies as well as unfavorable experience from Company self-insurance programs.
The Company’s effective income tax rate was 25.8% and 23.7% in second quarter 2019 and 2018, respectively, and 25.2% and 22.9% in first half 2019 and 2018, respectively. These higher tax rates in 2019 principally reflect higher state and foreign income tax expense, including the effects of certain international tax provisions relating to U.S. tax reform legislation that became effective at the beginning of 2018. Earnings per share benefited from stock purchases in the open market resulting in fewer shares outstanding in both second quarter and first half 2019.”
Tootsie Roll Industries (NYSE:TR) stock price history
The image below, obtained from Google, shows the stock price history of Tootsie Roll Industries over the last 5 years. And it's been a very good time for Tootsie Roll Industries stockholders.5 years ago the stock was trading at around $25.20 a stock and its currently trading at $36.75 a stock. That's a strong return of 45.8% provided to Tootsie Roll Industries stockholders over the last 5 years. The stock of Tootsie Roll Industries is trading at a lot closer to its 52 week high of $40.82 than it is to its 52 week low of $27.26 which to us is a clear indication that the short term sentiment and momentum of Tootsie Roll Industries' stock is positive at this point in time.
Tootsie Roll Industries (NYSE: TR) latest stock valuation
So what is Tootsie Roll Industries stock worth based on the release of their latest earnings report? Based on the group's latest earnings provided our valuation model provides a target (full value) price at $25.10 a Tootsie Roll Industries stock. We therefore believe that the stock is overvalued.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $25.10. Thus we see a good entry point into Tootsie Roll Industries stock at $23.20 or below. Unless the group's next earnings report surprises significantly to the upside we cannot see Tootsie Roll Industries continuing to trade at its current lofty valuations. We therefore expect the stock of Tootsie Roll Industries to pull back sharply in coming weeks and month to more realistic levels, unless their 3rd quarter earnings (which is expected to be released on 10 October 2019) surprises significantly to the upside.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $25.10. Thus we see a good entry point into Tootsie Roll Industries stock at $23.20 or below. Unless the group's next earnings report surprises significantly to the upside we cannot see Tootsie Roll Industries continuing to trade at its current lofty valuations. We therefore expect the stock of Tootsie Roll Industries to pull back sharply in coming weeks and month to more realistic levels, unless their 3rd quarter earnings (which is expected to be released on 10 October 2019) surprises significantly to the upside.