A strong first-quarter fiscal 2013 performance and incremental
Farmer Bros Co.
) to attain a Zacks #1 Rank (Strong Buy) on December 25, 2012.
Furthermore, the coffee company attained a 52-week high of $14.91
on December 24. The company also saw the Zacks Consensus Estimate
for 2013 earnings soar 133% since the announcement of the first
The Rank Drivers
Combination of a solid cost-control strategy, strong results
and an upbeat outlook are the rank drivers for this stock.
On November 5, Farmer Bros reported first-quarter fiscal 2013
(ended September 30) earnings of 19 cents per share, largely
beating the Zacks Consensus Estimate of breakeven. Earnings also
rebounded from prior-year quarter's loss of 50 cents as gross
margin expansion and solid expense control made up for the
lukewarm revenues. Top line declined 2% in the quarter to $119.2
Gross margins improved 400 basis points to 37% in the quarter
due to lower coffee costs. Adjusted EBITDA improved 157% year
over year to $12.1 million driven by gross margin expansion and
cost control. Going forward, the company believes that lower
coffee costs will further improve the company's financials.
Earnings Estimates Jumping
Over the last 60 days, the Zacks Consensus Estimate for 2013
has soared 133% to 42 cents, as 2 of 3 estimates were revised
higher. This reflects a year-over-year increase of 122.2%. The
Zacks Consensus Estimate for fiscal 2014 has risen almost 96% to
47 cents per share over the same time frame, reflecting a
year-over-year increase of 11.9%.
Framer Bros looks expensive at current levels. Farmer Bros
currently trades at a forward price-to-earnings (P/E) of 34.10x,
representing a premium of 65.6% to the peer group average of
20.59 x. On a price-to-book basis too, the stock is trading at a
premium to the peer group. However, the shares trade at a
discount of 23.0% to the peer group on a price-to-sales basis.
Overall, the premium valuation looks justified given its strong
Based in Delaware, Farmer Bros manufactures coffee, tea and
other culinary products and distributes them to restaurants,
hotels, casinos, hospitals and other food service providers. The
market cap of the company is $242.5 million. Framer Bros competes
The J. M. Smucker Company
), which carries a Zacks #3 Rank (short term 'Hold' rating).
FARMER BROS CO (FARM): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
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