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Beyond Meat (BYND) Down on Q3 Loss & Lower-Than-Expected Sales

Beyond Meat, Inc. BYND posted third-quarter 2020 results, wherein both top and bottom lines came below the Zacks Consensus Estimate and the latter deteriorated year over year. Results continued being affected by the ongoing challenges related to coronavirus. Nonetheless, sales were aided by strength in the retail channel, though foodservice demand remained soft amid the pandemic. This Zacks Rank #5 (Strong Sell) stock plummeted 22.4% in the after-market trading session, following the earnings release on Nov 9.

Management stated that the company continues to reel under major sluggishness in its foodservice business. This is accountable to increased stay-at-home mandates and curbs on operating capacity, which have resulted in closures or considerably reduced operations for many foodservice customers. Moreover, the increased demand in the retail channel stemming from increased at-home consumption has moderated due to reduced panic-buying trends in general. Owing to the uncertainty surrounding demand patterns amid the pandemic, management kept its 2020 guidance suspended.

Q3 Highlights

The company posted an adjusted loss of 28 cents per share against the Zacks Consensus Estimate of earnings of 3 cents. Moreover, the bottom line deteriorated from earnings of 6 cents reported in the year-ago period.

Beyond Meat, Inc. Price, Consensus and EPS Surprise

Beyond Meat, Inc. price-consensus-eps-surprise-chart | Beyond Meat, Inc. Quote

Net revenues of $94.4 million advanced 2.7% year over year, while it fell significantly short of the Zacks Consensus Estimate of $136 million. Revenues were backed by higher retail channel sales, which were largely countered by lower foodservice channel sales due to the continued impacts of the pandemic on foodservice demand. Apart from this, consumers’ increased freezer hoarding in the second quarter of 2020 led to a sequentially softer retail consumer demand in the third quarter. Further, volumes were somewhat negated by reduced price per pound stemming from the company’s promotional activity, along with product mix shifts.

U.S. net revenues jumped 25.4% to $78.4 million, with retail revenues surging 40.5% to $62.1 million and foodservice revenues tumbling 11.1% to $16.3 million. International net revenues declined 45.5% to $16.1 million, wherein retail revenues grew 26.7% to almost $8 million but foodservice revenues plunged 65.1% to $8.1 million.

Adjusted gross profit fell 16.8% to $27.3 million and the adjusted gross margin was 28.9%, down    670 basis points (bps) year over year. This downside was mainly due to reduced net price realization stemming from increased trade discounts and lower absorption of fixed overhead production expenses. Adjusted gross profit and margin excluded $1.8 million of expenses associated with COVID-19.   

SG&A expenses increased from $20.9 million to $33.6 million in the quarter. Adjusted EBITDA came in at a loss of $4.3 million in the quarter under review compared with adjusted EBITDA of $11 million in the year-ago period.

Other Financial Updates

Beyond Meat concluded the quarter with cash and cash equivalents of $214.6 million, total outstanding debt of $50 million and total shareholders’ equity of $379.4 million. In the first nine months ended Sep 36, the company used net cash from operating activities of $42.7 million, while capital expenditures for the period totaled $38 million. Capital expenditures increased from $9.5 million in the year-ago period due to sustained investments in production equipment and facilities associated with capacity expansion endeavors.

Shares of the company have rallied 18.1% in the past three months against the industry’s decline of 2%.

Looking for Solid Food Stocks? Check These

Pilgrim’s Pride PPC, which carries a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 2.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamb Weston
LW also has a Zacks Rank #2 and a long-term earnings growth rate of 7%.

United Natural UNFI, which carries a Zacks Rank #2, has a trailing four-quarter earnings surprise of 4.8%, on average.

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