Celsius (NASDAQ:CELH) Misses Q1 Revenue Estimates, Stock Drops

Max Juang /
2024/05/07 8:38 am EDT

Energy drink company Celsius (NASDAQ:CELH) fell short of analysts' expectations in Q1 CY2024, with revenue up 36.8% year on year to $355.7 million. It made a GAAP profit of $0.27 per share, down from its profit of $0.40 per share in the same quarter last year.

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Celsius (CELH) Q1 CY2024 Highlights:

  • Revenue: $355.7 million vs analyst estimates of $389.8 million (8.8% miss)
  • Adjusted EBITDA: $88.0 million vs analyst estimates of $72.7 million (21.0% beat)
  • EPS: $0.27 vs analyst estimates of $0.19 (38.9% beat)
  • Gross Margin (GAAP): 51.2%, up from 43.8% in the same quarter last year
  • Market Capitalization: $18.26 billion

With its proprietary MetaPlus formula as the basis for key products, Celsius (NASDAQ:CELH) offers energy drinks that feature natural ingredients to help in fitness and weight management.

Beverages and Alcohol

These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.

Sales Growth

Celsius is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.

As you can see below, the company's annualized revenue growth rate of 110% over the last three years was incredible for a consumer staples business.

Celsius Total Revenue

This quarter, Celsius pulled off a wonderful 36.8% year-on-year revenue growth rate, but its $355.7 million in revenue fell short of Wall Street's rosy estimates. Looking ahead, Wall Street expects sales to grow 42.5% over the next 12 months, an acceleration from this quarter.

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Operating Margin

Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.

This quarter, Celsius generated an operating profit margin of 23.4%, up 6.1 percentage points year on year. This increase was encouraging, and we can infer Celsius had stronger pricing power and lower raw materials/transportation costs because its gross margin expanded more than its operating margin.

Celsius Operating Margin (GAAP)

Zooming out, Celsius has done a decent job managing its expenses over the last eight quarters. The company has produced an average operating margin of 8.3%, higher than the broader consumer staples sector. On top of that, its margin has improved by 37.3 percentage points on average over the last year, a great sign for shareholders.

Key Takeaways from Celsius's Q1 Results

We were impressed by how significantly Celsius blew past analysts' adjusted EBITDA expectations this quarter. We were also excited its gross margin outperformed Wall Street's estimates. On the other hand, its revenue unfortunately missed analysts' expectations. Overall, we think there will be focus on the revenue miss since this is a stock where topline is a key part of the bull case. The stock is down 5.1% after reporting, trading at $74.32 per share.

So should you invest in Celsius right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.