J&J Snack Foods (NASDAQ:JJSF) Surprises With Strong Q1

Kayode Omotosho /
2024/05/06 4:18 pm EDT

Snack food company J&J Snack Foods (NASDAQ:JJSF) announced better-than-expected results in Q1 CY2024, with revenue up 6.5% year on year to $359.7 million. It made a non-GAAP profit of $0.84 per share, improving from its profit of $0.36 per share in the same quarter last year.

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J&J Snack Foods (JJSF) Q1 CY2024 Highlights:

  • Revenue: $359.7 million vs analyst estimates of $340.6 million (5.6% beat)
  • EPS (non-GAAP): $0.84 vs analyst estimates of $0.59 (41.4% beat)
  • Gross Margin (GAAP): 30.1%, up from 26.8% in the same quarter last year
  • Free Cash Flow was -$3.95 million, down from $29.02 million in the previous quarter
  • Market Capitalization: $2.68 billion

Dan Fachner, J&J Snack Foods Chairman, President, and CEO, commented, “J&J Snack Foods delivered another period of strong financial results, including the highest fiscal second quarter net sales in our company’s history -topping our previous record achieved in the prior year. Top line performance was driven by higher volumes of our core products and brands, as well as strong new business performance in our Food Service and Retail channels. Our investments over the last two years to increase production capacity in churros and pretzels have positioned us to pursue new sales opportunities. Also, the ongoing success of our initiatives to enhance profit margins and drive efficiency across our business led to a 330-basis point improvement in gross margin to 30.1%. This resulted in adjusted operating income and adjusted EBITDA growth of 81.0% and 43.1%, respectively, and a more than 90% increase in net earnings, EPS, and adjusted EPS.”

Best known for its SuperPretzel soft pretzels and ICEE frozen drinks, J&J Snack Foods (NASDAQ:JJSF) produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers.

Shelf-Stable Food

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Sales Growth

J&J Snack Foods 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 17.8% over the last three years was impressive for a consumer staples business.

J&J Snack Foods Total Revenue

This quarter, J&J Snack Foods reported solid year-on-year revenue growth of 6.5%, and its $359.7 million in revenue outperformed Wall Street's estimates by 5.6%.

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Cash Is King

If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.

J&J Snack Foods burned through $3.95 million of cash in Q1, in line with its cash burn last year. This result represents a negative 1.1% free cash flow margin.

J&J Snack Foods Free Cash Flow Margin

Over the last eight quarters, J&J Snack Foods has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 3.1%, subpar for a consumer staples business. However, its margin has averaged year-on-year increases of 7.6 percentage points over the last 12 months. Continued momentum should improve its cash flow prospects.

Key Takeaways from J&J Snack Foods's Q1 Results

We were impressed by how significantly J&J Snack Foods blew past analysts' EPS expectations this quarter. We were also excited its revenue outperformed Wall Street's estimates as it produced higher sales volumes than anticipated. Specifically, its new churros product led the way with 24% year-on-year growth and now represents $30.8 million in revenue - a large chunk of this comes from its partnership with the fast-food restaurant chain Subway. Zooming out, we think this was an impressive quarter that should delight shareholders. The stock is up 4.3% after reporting and currently trades at $143.61 per share.

J&J Snack Foods may have had a good quarter, but does that mean you should invest 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.