Analysts on Wall Street remain optimistic on the prospects of Freshpet Inc. (NASDAQ: FRPT) despite the company posting a wider loss in 2Q2016 than analysts expected. Some have explained why they believe the specialty pet-food company has a bright future. Peter Benedict of Baird cited strong velocity metrics that he said are heading in the right direction.
Freshpet Inc. (NASDAQ: FRPT)’s velocity growth for 2Q2-16 rose to 4.5% from 1.4% in 1Q2016. Velocity growth measure is based on weekly sales against average store. Baird’s Benedict expects continued improvement in Freshpet’s velocity growth in the balance of the year as new products are launched to market.
Improving gross margin also make Baird confident that Freshpet will post better EBITDA figure in 2H2016. Logistics savings are expected to play a role in lifting margins in the balance of 2016.
Baird has an Outperform rating and price target of $10 on the stock of Freshpet Inc. (NASDAQ: FRPT).
The other reason Wall Street is excited about the prospects of Freshpet is the company’s selection for the CEO job. Freshpet has tapped Billy Cyr to become its CEO effective September 2016. Cyr was the CEO of Sunny Delight and an executive of Procter & Gamble Co (NYSE:PG). Analysts say that Cyr will bring analytical rigor, incremental relationships and operational discipline to Freshpet.
Cyr will replace Richard Thompson, who retired. Freshpet booked more than $1.6 million loss in 2Q2016 related to the retirement of Thompson.
What transpired in 2Q?
Freshpet posted EPS loss of $0.10, worse than EPS loss of $0.07 a year ago. The EPS in the latest quarter also missed the consensus estimate of $0.03. However, revenue of $33 million rose slightly from $32.92 million in the year-ago quarter and exceeded the consensus estimate by at least $0.08 million.
2016 outlook – Freshpet Inc. (NASDAQ: FRPT)
For 2016, Freshpet Inc. (NASDAQ: FRPT) is looking for revenue to be more than $137 million, indicating an increase of about 18%. Adjusted EBITDA is expected to increase about 67% to $18.5%.