MGP Ingredients's (NASDAQ:MGPI) Q1 Earnings Results: Revenue In Line With Expectations

Kayode Omotosho /
2024/05/02 7:58 am EDT

Food and beverage supplier MGP Ingredients (NASDAQGS:MGPI) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 15.1% year on year to $170.6 million. On the other hand, the company's full-year revenue guidance of $749 million at the midpoint came in slightly below analysts' estimates. It made a non-GAAP profit of $1.07 per share, down from its profit of $1.39 per share in the same quarter last year.

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MGP Ingredients (MGPI) Q1 CY2024 Highlights:

  • Revenue: $170.6 million vs analyst estimates of $170.3 million (small beat)
  • EPS (non-GAAP): $1.07 vs analyst estimates of $0.99 (8.3% beat)
  • The company reconfirmed its revenue guidance for the full year of $749 million at the midpoint (below expectations)
  • The company reconfirmed its EPS (non-GAAP) guidance for the full year of $6.18 million at the midpoint (in line)
  • Gross Margin (GAAP): 36.8%, up from 34.7% in the same quarter last year
  • Free Cash Flow was -$2.40 million, down from $21.97 million in the previous quarter
  • Market Capitalization: $1.72 billion

Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQGS:MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry

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

MGP Ingredients 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 25.8% over the last three years was exceptional for a consumer staples business.

MGP Ingredients Total Revenue

This quarter, MGP Ingredients reported a rather uninspiring 15.1% year-on-year revenue decline to $170.6 million in revenue, in line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to decline 5% over the next 12 months.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.

MGP Ingredients burned through $2.40 million of cash in Q1, representing a negative 1.4% free cash flow margin. The company increased its cash burn by 78.6% year on year.

MGP Ingredients Free Cash Flow Margin

Over the last eight quarters, MGP Ingredients 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 3.6%, subpar for a consumer staples business. However, its margin has averaged year-on-year increases of 2 percentage points over the last 12 months. Continued momentum should improve its cash flow prospects.

Key Takeaways from MGP Ingredients's Q1 Results

It was good to see MGP Ingredients beat analysts' EPS expectations this quarter and maintain full year EPS guidance, which is in line with expectations. The stock is up 4.6% after reporting and currently trades at $81.99 per share.

So should you invest in MGP Ingredients 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.