Utz (NYSE:UTZ) Misses Q4 Sales Targets

Radek Strnad /
2024/02/29 6:53 am EST

Snack food company Utz Brands (NYSE:UTZ) fell short of analysts' expectations in Q4 FY2023, with revenue flat year on year at $352.1 million. It made a non-GAAP profit of $0.16 per share, improving from its profit of $0.15 per share in the same quarter last year.

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Utz (UTZ) Q4 FY2023 Highlights:

  • Revenue: $352.1 million vs analyst estimates of $354.2 million (0.6% miss)
  • EPS (non-GAAP): $0.16 vs analyst estimates of $0.16 (small beat)
  • Guided to full year 2024 EPS (non-GAAP) of $0.68 per share vs analyst estimates of $0.65
  • Free Cash Flow of $17.49 million, down 53.8% from the previous quarter
  • Gross Margin (GAAP): 32.8%, up from 32% in the same quarter last year
  • Organic Revenue was down 0.3% year on year
  • Sales Volumes were up 0.5% year on year
  • Market Capitalization: $1.49 billion

“In 2023 we evolved through capacity, distribution and capability investments that position Utz to capture its full potential. In a dynamic environment, I am proud of our continued progress on building Utz into a pure-play U.S. snacking company of scale with an advantaged brand portfolio in the attractive Salty Snacks category,” said Howard Friedman, Chief Executive Officer.

Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE:UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.

Packaged Food

Packaged food stocks are considered resilient investments because people always need to eat. These companies therefore can enjoy consistent demand as long as they stay on top of changing consumer preferences. But consumer preferences can be a double-edged sword, as companies that aren't at the front of trends such as health and wellness and natural ingredients can fall behind. 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

Utz is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.

As you can see below, the company's annualized revenue growth rate of 14.3% over the last three years was solid despite selling a similar number of units each year. We'll explore what this means in the "Volume Growth" section.

Utz Total Revenue

This quarter, Utz missed Wall Street's estimates and reported a rather uninspiring 0.7% year-on-year revenue decline, generating $352.1 million in revenue. Looking ahead, Wall Street expects sales to grow 1.2% over the next 12 months, an acceleration from this quarter.

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Volume Growth

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Utz generated its growth from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Utz's quarterly sales volumes have, on average, stayed about the same. This stability is normal as the quantity demanded for consumer staples products typically doesn't see much volatility. The company's flat volumes also indicate its average organic revenue growth of 9.2% was generated from price increases. Utz Year-On-Year Volume Growth

In Utz's Q4 2023, year on year sales volumes were flat. This result was a well-appreciated turnaround from the 2% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.

Key Takeaways from Utz's Q4 Results

The key positive was that Utz guided full year 2024 above expectations. On the other hand, its organic revenue and operating margin unfortunately missed analysts' expectations this quarter. Overall, this was a mixed quarter for Utz. The stock is up 2.1% after reporting and currently trades at $18.73 per share.

So should you invest in Utz 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.