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Category: UTZ Brands (UTZ)
Date: 22 March 2021 Stock price of UTZ Brands: $26.56 Market Capital of UTZ Brands: $2.34 billion We take a a look at the 4th quarter 2020 earnings report of UTZ Brands, a manufacturer of a diverse portfolio of savory snacks through popular brands including Utz®, ON THE BORDER® Chips & Dips, Golden Flake®, Zapp’s®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®, among others
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We are encouraged with our start to 2021 with solid year-to-date retail sales growth through the end of February. While we will begin to lap strong results from the impact of COVID-19 in the prior year, our brands are well-positioned for long-term growth. Based on the significant increase in new buyers and higher repeat rates of purchase over the past twelve months"
More About UTZ Brands
Utz Brands, Inc. (NYSE: UTZ) manufactures a diverse portfolio of savory snacks through popular brands including Utz®, ON THE BORDER® Chips & Dips, Golden Flake®, Zapp’s®, Good Health®, Boulder Canyon®, Hawaiian® Brand, and TORTIYAHS!®, among others. After nearly a century with strong family heritage, Utz continues to have a passion for exciting and delighting consumers with delicious snack foods made from top-quality ingredients. Utz’s products are distributed nationally and internationally through grocery, mass merchant, club, convenience, drug and other channels. Based in Hanover, Pennsylvania, Utz operates fourteen facilities located in Pennsylvania, Alabama, Arizona, Illinois, Indiana, Louisiana, Washington, and Massachusetts.
Overview of UTZ Brands 4th quarter 2020 earnings report
Fourth Quarter and Full-Year 2020 Growth Highlights
For the 13-week period ended December 27, 2020, our retail sales as measured by IRI MULO-C increased 9.3%, significantly above the total salty snack category growth of 7.1%, as we continued to perform well across most product sub-categories, channels and geographies. Our IRI retail sales growth exceeded our pro forma net sales growth due primarily to the impact of unmeasured channels and the increase in IO discounts.
For the 13-week period ended December 27, 2020, Power Brands retail sales growth of 11.1% was led by Utz®, ON THE BORDER®, Zapp’s®, TORTIYAHS!®, Golden Flake® Pork Skins and Boulder Canyon® brands. The retail sales decline of 1.2% in Foundation Brands reflects our strategy to focus on our Power Brands, and softness in the convenience channel primarily due to COVID-19. Conversely, our Power Brands have a stronger presence in the large format channels which continued to perform well during the quarter.
For the 13-week period ended December 27, 2020, our retail sales as measured by IRI MULO-C increased 9.3%, significantly above the total salty snack category growth of 7.1%, as we continued to perform well across most product sub-categories, channels and geographies. Our IRI retail sales growth exceeded our pro forma net sales growth due primarily to the impact of unmeasured channels and the increase in IO discounts.
For the 13-week period ended December 27, 2020, Power Brands retail sales growth of 11.1% was led by Utz®, ON THE BORDER®, Zapp’s®, TORTIYAHS!®, Golden Flake® Pork Skins and Boulder Canyon® brands. The retail sales decline of 1.2% in Foundation Brands reflects our strategy to focus on our Power Brands, and softness in the convenience channel primarily due to COVID-19. Conversely, our Power Brands have a stronger presence in the large format channels which continued to perform well during the quarter.
UTZ Brands (UTZ) management commentary on 4th quarter 2020 earnings
HANOVER, Pa.--(BUSINESS WIRE)-- Utz Brands, Inc. (NYSE: UTZ) (“Utz” or the “Company”), a leading U.S. manufacturer of branded salty snacks, today reported financial results for the Company’s 14-week fiscal fourth quarter and 53-week fiscal 2020 ended January 3, 2021.
“2020 was a transformational year for Utz. We began our new chapter as a publicly traded company, and we delivered double-digit retail sales growth, making Utz the #3 brand platform in U.S. Salty Snacks and one of the fastest growing salty snack platforms of scale. Growth was led by our Power Brands and we added three million more buyers during the year. Despite the challenges of the pandemic and the demanding environment for our team, we reacted quickly and put protocols in place to protect our associates and customers, which enabled us to deliver these strong results,” said Dylan Lissette, Chief Executive Officer of Utz. “Looking ahead, we remain excited about our opportunity for continued long-term profitable growth, as we actively deploy our value creation strategies for the benefit of our stockholders.”
Fiscal Year 2021 Outlook
“We are encouraged with our start to 2021 with solid year-to-date retail sales growth through the end of February. While we will begin to lap strong results from the impact of COVID-19 in the prior year, our brands are well-positioned for long-term growth. Based on the significant increase in new buyers and higher repeat rates of purchase over the past twelve months, we believe that the COVID-19 impact on at-home eating occasions will have a lasting, beneficial impact to long-term demand trends. Our projected pro forma two-year CAGR for fiscal 2020 and 2021 of approximately 6% is well above our stated long-term organic growth outlook of 3 to 4%, and we will continue to invest incremental marketing dollars to build our brands and accelerate revenue growth,” said Cary Devore, Chief Financial Officer of Utz.
“From a cost and margin standpoint, our productivity efforts are on-target and set to double to 2% of COGS in 2021, and we remain on track to ramp up to our previously stated productivity goals of 3-4% of COGS by 2023. In addition, we are implementing pricing initiatives to help offset expected commodity inflation of approximately 4%. We will continue to pursue actions that strengthen our long-term fundamentals, and our goal remains to be the fastest growing, pure-play branded snack platform of scale in the U.S.,” Devore added
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For the 52-week fiscal year ending January 2, 2022, the Company is providing the following guidance:
In addition to the risks and uncertainties identified under “Forward-Looking Statements,” the Company’s 2021 guidance is estimated based on the following assumptions:
“2020 was a transformational year for Utz. We began our new chapter as a publicly traded company, and we delivered double-digit retail sales growth, making Utz the #3 brand platform in U.S. Salty Snacks and one of the fastest growing salty snack platforms of scale. Growth was led by our Power Brands and we added three million more buyers during the year. Despite the challenges of the pandemic and the demanding environment for our team, we reacted quickly and put protocols in place to protect our associates and customers, which enabled us to deliver these strong results,” said Dylan Lissette, Chief Executive Officer of Utz. “Looking ahead, we remain excited about our opportunity for continued long-term profitable growth, as we actively deploy our value creation strategies for the benefit of our stockholders.”
Fiscal Year 2021 Outlook
“We are encouraged with our start to 2021 with solid year-to-date retail sales growth through the end of February. While we will begin to lap strong results from the impact of COVID-19 in the prior year, our brands are well-positioned for long-term growth. Based on the significant increase in new buyers and higher repeat rates of purchase over the past twelve months, we believe that the COVID-19 impact on at-home eating occasions will have a lasting, beneficial impact to long-term demand trends. Our projected pro forma two-year CAGR for fiscal 2020 and 2021 of approximately 6% is well above our stated long-term organic growth outlook of 3 to 4%, and we will continue to invest incremental marketing dollars to build our brands and accelerate revenue growth,” said Cary Devore, Chief Financial Officer of Utz.
“From a cost and margin standpoint, our productivity efforts are on-target and set to double to 2% of COGS in 2021, and we remain on track to ramp up to our previously stated productivity goals of 3-4% of COGS by 2023. In addition, we are implementing pricing initiatives to help offset expected commodity inflation of approximately 4%. We will continue to pursue actions that strengthen our long-term fundamentals, and our goal remains to be the fastest growing, pure-play branded snack platform of scale in the U.S.,” Devore added
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For the 52-week fiscal year ending January 2, 2022, the Company is providing the following guidance:
- Net sales consistent with 2020 Pro Forma Net Sales of $1.16B(1 ) with modest organic sales growth year over year. The Company’s projected pro forma two-year CAGR for fiscal 2020 and 2021 of approximately 6% is well-above the Company’s long-term growth outlook of 3 – 4%.
- Adjusted EBITDA of $180 – $190 million (2) versus 2020 Further Adjusted EBITDA of $181 million(3), delivering a margin of approximately 16%.
- Adjusted Earnings Per Share of $0.70 – $0.75, which excludes step-up depreciation & amortization (“D&A”), stock compensation expense, and non-recurring items. This assumes fully diluted shares on an as-converted basis of approximately 142 million.
In addition to the risks and uncertainties identified under “Forward-Looking Statements,” the Company’s 2021 guidance is estimated based on the following assumptions:
- Funded $25 million Vitner's acquisition in February 2021 with balance sheet cash
- Expecting 200 – 250 Independent Route (“IO”) conversions
- Core D&A of $25 – $27 million and step-up D&A of $57 – $59 million, both comprised of approximately 2/3 cost of goods sold and 1/3 selling and administrative expense
- Capital expenditures of $30 – $40 million
- Commodity inflation of approximately 4%
- Productivity of approximately 2% of cost of goods sold
- Cash interest expense of approximately $30 million(4)
- Effective cash tax rate of 23.0 - 25.0% (% of pre-tax book income)
- Net leverage ratio of approximately 3.5x by end of 2021(5)
UTZ Brands (UTZ) stock price history since its listing
The image below shows the stock price history of UTZ Brands (UTZ) over the last 5 years. And its been a good time for UTZ Brands stockholders with the stock increasing by 175.8% over the last 5 years.
The stock of UTZ Brands is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of UTZ Brands stock is positive at this point in time.
The stock of UTZ Brands is trading at closer to its 52 week high than it is to its 52 week low which is a clear indication that the short term sentiment and momentum of UTZ Brands stock is positive at this point in time.
Latest stock valuation of UTZ Brands (UTZ)
So what is UTZ Brands (UTZ) stock worth based on their 4th quarter 2020 earnings report? Based on their earnings report our valuation model provides a target price (full value price) for UTZ Brands (UTZ) at $38.20 a stock
We therefore believe the stock of UTZ Brands (UTZ) is undervalued at its current price of $26.56
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $38.20 thus a good entry point into UTZ Brands would be at $34.40 or below.
We expect the stock of UTZ Brands to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued
We therefore believe the stock of UTZ Brands (UTZ) is undervalued at its current price of $26.56
We usually recommend long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price), which in this case is $38.20 thus a good entry point into UTZ Brands would be at $34.40 or below.
We expect the stock of UTZ Brands to kick up from current levels in coming weeks and months to levels closer to our target price (full value price), as their stock is price is undervalued
Next earnings release of UTZ Brands (UTZ)
It is expected that UTZ Brands (UTZ) will release their 1st quarter 2021 earnings report in early June 2021
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