Freshpet, Inc. FRPT reported solid third-quarter fiscal 2024 results, wherein both the top and the bottom lines beat the Zacks Consensus Estimate and increased year over year.
The company reached a key milestone, marking its 25th consecutive quarter of more than 25% year-on-year net sales growth, with strong operational performance. This momentum is expected to continue in the upcoming quarters. Notably, this is the third consecutive quarter where its adjusted gross margin exceeded the 2027 target. This robust performance positions the company well to achieve its 2027 target of $1.8 billion in net sales and expand household penetration to 20 million.
FRPT’s Quarterly Performance: Key Metrics and Insights
Freshpet reported earnings per share (EPS) of 24 cents, a significant improvement from a loss of 15 cents in the same quarter last year. The metric came above the Zacks Consensus Estimate of 14 cents per share, representing a surprise of 71.4%. This year-over-year upside was driven by increased sales, improved gross margins and lower logistics costs relative to net sales, partially offset by higher selling, general and administrative (SG&A) expenses.
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Freshpet, Inc. Price, Consensus and EPS Surprise
Freshpet, Inc. price-consensus-eps-surprise-chart | Freshpet, Inc. Quote
The company reported consolidated net sales of $253.4 million, which beat the Zacks Consensus Estimate of $248 million. The metric increased 26.3% from $200.6 million posted in the year-ago period. This year-over-year growth was driven by a 26.1% gain in sales volume.
Sales from the company’s Grocery, Mass, International and Digital channel increased 24.5% year over year to $208.9 million, representing 82% of total sales. The Pet Specialty and Club’s sales rose 35.4% year over year to $44.5 million, accounting for 18% of total sales.
Freshpet’s adjusted gross profit increased 46% year over year to $117.7 million. The adjusted gross margin expanded 630 basis points (bps) to 46.5% compared with 40.2% in the third quarter of fiscal 2023. This increase can be attributed to improvements in input costs, yield, throughput and quality expenses. Specifically, input costs as a percentage of net sales improved 450 bps compared with the previous year due to enhanced yields and lower commodity prices.
Adjusted SG&A expenses rose 29.2% year over year to $74.2 million in the quarter. As a percentage of net sales, adjusted SG&A expenses increased 70 bps year over year to 29.3%.
The adjusted EBITDA came in at $43.5 million compared with $23.2 million in the year-ago period. This improvement was driven by a higher gross margin and reduced logistics costs, partially offset by increased investments in media and higher incentive compensation expenses.
FRPT’s Financial Health Snapshot
Freshpet exited the quarter with cash and cash equivalents of $274.6 million, total debt outstanding of $394.6 million, net of $7.9 million in unamortized debt issuance costs and total shareholders’ equity of $1,021.4 million. In the nine months ended Sept. 30, 2024, net cash provided by operating activities was $103.9 million.
What to Expect From FRPT in 2024
Freshpet has updated its net sales and adjusted EBITDA forecasts for 2024, reflecting its ongoing strong performance. The company is committed to benefiting pets, people and the planet while remaining optimistic about its ability to finish the year on a high note. FRPT aims to generate significant value for the company’s shareholders as it progresses.
For 2024, management anticipates net sales of approximately $975 million, indicating a 27% increase from 2023. This revised forecast is an upgrade from the previous guidance of $965 million, driven by significant enhancements in operating efficiency and the successful launch of the new roll line in Ennis.
The company raised its expectation for adjusted EBITDA to approximately $155 million, up from the previous guidance of $140 million.
However, management expects 2024 capital expenditures to be approximately $180 million, a reduction from the previous guidance of $200 million. This adjustment is intended to support the installation of capacity to meet demand in 2025. The reduction in expenditures is due to the timing of various expansion projects, resulting in some costs being postponed until 2025.
This Zacks Rank #2 (Buy) stock has rallied 18.5% in the past three months compared with the industry’s growth of 0.5%.
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Other Top-Ranked Stocks
Here, we have highlighted three other top-ranked stocks, McCormick & Company, Incorporated MKC, United Natural Foods, Inc. UNFI and Vital Farms, Inc. VITL, currently carrying a Zacks Rank #2 each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
McCormick manufactures, markets and distributes spices, seasoning mixes, condiments, and other flavorful products to the food industry. MKC has a trailing four-quarter earnings surprise of 13.8%, on average.
The Zacks Consensus Estimate for McCormick’s current fiscal-year sales and earnings indicates growth of 1% and 8.2%, respectively, from the year-ago reported numbers.
United Natural Foods together with its subsidiaries, distributes natural, organic, specialty, produce and conventional grocery and non-food products.
The Zacks Consensus Estimate for UNFI’s current financial-year earnings implies significant growth from the year-ago period’s reported figure. UNFI has a trailing four-quarter earnings surprise of 199.3%, on average.
Vital Farms, a food company, provides pasture-raised products that offer shell eggs, butter, hard-boiled eggs and liquid whole eggs. VITL has a trailing four-quarter earnings surprise of 82.5%, on average.
The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings implies growth of around 27% and 88.1%, respectively, from the year-ago reported numbers.
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