Beyond Meat (BYND) stock has lost some sizzle this past month, falling 6% due to a combination of factors. Aside from increased competition from Impossible Foods, the fact that COVID-19 cases are rising in many states suggests further disruption of the restaurant industry which has been one of Beyond Meat’s main revenue drivers.
These are a few of the topics the faux meat company will discuss when its reports second quarter fiscal 2020 earnings results after the closing bell Tuesday. To be sure, by “losing some sizzle” is said in the context of the fact that the stock is still up more than 60% year to date, besting the 1% rise in the S&P 500 index. And since its IPO in 2019 at $25 per share, Beyond Meat stock has returned some 400%. All of that aside, the market is looking ahead, not backwards.
For the three months that ended June, Wall Street expects the El Segundo, Calif.-based company to lose 2 cents per share on revenue of $99.84 million. This compares to the year-ago quarter when it lost 24 cents per share on revenue of $67.25 million. For the full year, ending in December, earnings are expected to be 14 cents per share, while full-year revenue is expected to rise 55.7% year over year to reach $463.94 million.
Earlier during the pandemic, the shortage of fresh meat in the United States was seen as a potential tailwind for Beyond Meat, which has demonstrated accelerated growth over the past few years, forcing larger players like Tyson Foods (TSN) and Hormel Foods (HRL), among others, to take the alternative meat market seriously.
But the pandemic has been a double-edged sword since Beyond Meat also relies of the likes of Starbucks (SBUX) and Dunkin’ (DNKN) to sell its plant-based sausage. This means it struggled to grow revenue with fewer people driving to coffee shops and other restaurants like Yum! Brands’ (YUM) KFC which are Beyond Meat partners. What’s more, last week Impossible Foods announced that Walmart (WMT) is rolling out Impossible Burger grounds not only at 2,100 stores, the product will also be available through Walmart's website and app.
On Tuesday the company must affirm the belief that it can successfully disrupt the traditional meat marketplace and outline its path towards profitability. While there could be expectations for much softer foodservice demand in 2020 due to eroding economic conditions, optimistic investors are nonetheless hoping that sustained meat shortages will boost demand for Beyond Meat products. And this underscores the level of importance that will be placed on Beyond Meat’s guidance.
In the first quarter quarter, the pandemic-induced restaurant closures pressured the company’s foodservice distribution channel, though this was noticeably offset by strong sales in its retail partners which helped deliver a top- and bottom line beat. In Q1 revenue soared 141% to $97.1 million, yielding a profit of 3 cents per share, breezing by Street estimates for a 6-cent loss on revenue of $87.3 million.
The profit beat was impressive, particularly given the increased cost incurred to keep employees safe. Investors will look for similar execution on Tuesday, though analysts cautioned that Beyond Meat’s exposure to the restaurant sector is a potential threat to its performance going forward.
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