Shares of Freshpet (NASDAQ: FRPT) was barking up a tree this week as the maker of perishable dog and cat food delivered a strong fourth-quarter earnings report with solid improvement in profitability and another quarter of strong revenue growth.
As of Thursday’s close, the stock was up 23% for the week.
Freshpet gets a bone
Freshpet’s revenue in the quarter rose 29.9% to $215.4 million, ahead of the analyst consensus of $204.4 million. The company marked its sixth consecutive year of revenue growth above 25%, showing that demand for alternatives to packaged dry food continues to grow as Freshpet expands its footprint into new supermarkets and pet stores .
On the bottom line, the company also says its recent investments in manufacturing, infrastructure, and supply chain, like Kitchens 2.0, are paying off. Freshpet’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped from $18.8 million to $31.3 million in the quarter.
The company also reversed a generally accepted accounting principles (GAAP) net loss of $2.9 million to a profit of $15.3 million, or a per-share earnings of $0.31. It also crushed the average analyst estimate by just $0.05.
CEO Billy Cyr summed up the performance, saying, “Our strong results in 2023 show that Freshpet has reached an inflection point: The significant investments we made to create scale and expand our first mover advantage began to generate improved profitability and significant operating cash flow. .”
Wall Street generally cheered the results, with some analysts raising their price targets on the stock, noting that the company has demonstrated a competitive advantage and is beginning to show operating leverage in its business model. The results are also encouraging as it comes when much of the pet food industry is struggling after a slowdown following the outbreak of the pandemic. Freshpet maintained its strong revenue growth and accelerated its market share gains.
What’s next for Freshpet
Freshpet also impressed the market with its guidance for 2024. The company sees revenue of at least $950 million this year, representing growth of at least 24%, compared to the consensus at $954.2 million. It also forecast adjusted EBITDA of $100 million-$110 million, up from $66.6 million in 2023.
Freshpet stock is still expensive, but the company’s long track record of delivering growth quarter in and quarter out and improving margins shows it’s worth paying a premium for. Pet stock looks like a good bet to move higher from here.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Freshpet. The Motley Fool has a disclosure policy.
Why Freshpet Stock Jumped This Week was originally published by The Motley Fool
