Tupperware Brands got trounced last week on disappointing second-quarter sales and the company's reduction in its full-year earnings per share expectation to $5.40-$5.50, down from $5.66-$5.81. The company reported $1.47 cents of earnings per share for the second quarter, in line with expectations. Sales for the quarter came in at $674 million, less than expected sales of $687 million. As a result, shares of the stock fell sharply, down 11% on the news.
Tupperware is a global, direct-selling, consumer products company offering storage and serving solutions for the kitchen and home as well a line of personal care products. It operates in almost 100 countries and utilizes an independent sales force of 2.9 million representatives. Emerging markets account for two-thirds of the company's sales.
CEO Rick Goings blamed the lackluster sales on unrest in Ukraine and Russia as well as an unusually high number of long holiday weekends in Germany causing people to go away rather than host or attend Tupperware parties. A large part of the 3% reduction in earnings expectations is due to Venezuelan price controls and currency devaluation.
Whatever the reason, Tupperware is still a solid company and is currently priced to buy. You get a great product line that competes against other consumer product companies both through direct sales -- the famous Tupperware "party" -- and on the Internet.
The emerging market business is seeing 10% revenue growth. At $74, shares have a price-to-earnings ratio of 16 which is a big discount compared to other consumer product companies. For instance, shares of competitor Newell Rubbermaid. (NWL), at $31, currently sell at a price-to-earnings ratio of 19.2.
A great product, solid business model, strong growth in emerging markets, nice dividend yield, and now a good price, Tupperware is worth adding to your portfolio.
At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
TheStreet Ratings team rates TUPPERWARE BRANDS CORP as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate TUPPERWARE BRANDS CORP (TUP) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its notable return on equity, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Household Durables industry and the overall market, TUPPERWARE BRANDS CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has slightly increased to $60.70 million or 5.56% when compared to the same quarter last year. Despite an increase in cash flow, TUPPERWARE BRANDS CORP's cash flow growth rate is still lower than the industry average growth rate of 38.87%.
- TUPPERWARE BRANDS CORP's earnings per share declined by 35.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TUPPERWARE BRANDS CORP increased its bottom line by earning $5.18 versus $3.43 in the prior year. This year, the market expects an improvement in earnings ($5.47 versus $5.18).
- The gross profit margin for TUPPERWARE BRANDS CORP is rather high; currently it is at 66.53%. Regardless of TUP's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TUP's net profit margin of 7.05% compares favorably to the industry average.
- TUP, with its decline in revenue, underperformed when compared the industry average of 11.0%. Since the same quarter one year prior, revenues slightly dropped by 2.0%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- You can view the full analysis from the report here: TUP Ratings Report