Utz's (NYSE:UTZ) Q1 Earnings Results: Revenue In Line With Expectations

Jabin Bastian /
2024/05/02 6:37 am EDT

Snack food company Utz Brands (NYSE:UTZ) reported results in line with analysts' expectations in Q1 CY2024, with revenue down 1.4% year on year to $346.5 million. It made a non-GAAP profit of $0.14 per share, improving from its profit of $0.11 per share in the same quarter last year.

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Utz (UTZ) Q1 CY2024 Highlights:

  • Revenue: $346.5 million vs analyst estimates of $346.8 million (small miss)
  • Adjusted EBITDA: $43.4 million vs analyst estimates of $42.9 million (1.2% beat)
  • EPS (non-GAAP): $0.14 vs analyst estimates of $0.13 (10.5% beat)
  • Full year guidance maintained for organic sales and adjusted EBITDA, raised for EPS (due to tax and interest, though, rather than fundamentals)
  • Gross Margin (GAAP): 34.5%, up from 29.7% in the same quarter last year
  • Free Cash Flow was -$22.7 million, down from $17.49 million in the previous quarter
  • Organic Revenue was up 1.5% year on year
  • Sales Volumes were up 1.1% year on year
  • Market Capitalization: $1.48 billion

“I’m pleased with our strong start to the year, as we gained dollar, pound, and unit share in the Salty Snacks category in the first quarter. In addition, we delivered our fifth consecutive quarter of year-over-year Adjusted EBITDA Margin expansion, and we drove 27% Adjusted Earnings per Share growth,” said Howard Friedman, Chief Executive Officer of Utz.

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.

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

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 12.5% over the last three years was solid despite consumers buying less of its products. 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 1.4% year-on-year revenue decline, generating $346.5 million in revenue. Looking ahead, Wall Street expects sales to grow 1.3% 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 average quarterly sales volumes have shrunk by 1.2%. This decrease isn't ideal as the quantity demanded for consumer staples products is typically stable. Luckily, Utz was able to offset fewer customers purchasing its products by charging higher prices, enabling it to generate 6.8% average organic revenue growth. We hope the company can grow its volumes soon, however, as consistent price increases (on top of inflation) aren't sustainable over the long term unless the business is really really special.

Utz Year-On-Year Volume Growth

In Utz's Q1 2024, sales volumes jumped 1.1% year on year. This result was a well-appreciated turnaround from the 5.7% year-on-year decline it posted 12 months ago, showing the company is heading in the right direction.

Key Takeaways from Utz's Q1 Results

It was good to see Utz beat analysts' adjusted EBITDA and EPS expectations this quarter. On the other hand, its organic revenue unfortunately missed analysts' expectations and its operating margin missed Wall Street's estimates. That the company maintained organic sales and adjusted EBITDA guidance for the full year shows that the company is roughly on track. Overall, this was a mixed quarter for Utz. The stock is flat after reporting and currently trades at $18.13 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.