Amplify Snack Brands (BETR) sort of rules the world of BFY and RTE. But it's kind of falling down on the old EPS.
BFY is "better for you." RTE equals "ready to eat." Amplify, whose best known product is Skinny Pop popcorn, has the products that fit nicely with popular tastes for healthier, less-processed products. What it hasn't got - at least according to its latest earnings report - is a financial profile that matches what investors want.
Amplify posted third quarter earnings of 12 cents a share late Monday, missing analysts' projections of 14 cents a share. The stock paid a heavy price for the shortfall, plunging about 25% in Tuesday's trading session to $10.16, the worst performing stock traded on the New York Stock Exchange today. During trading, it sank into single-digit territory for the first time since February.
Amplify is trading at about a 40% discount to its IPO price of $18 a share in August 2015. The collapse in the share price is presumably taking a toll on its financial sponsor, TA Associates, which purchased the company in 2014, and still holds 58% of the common shares, according to a proxy statement the company filed this past spring.
Amplify's growing pains stem from trying to move beyond its roots as a single product phenomenon to a multi product global food company. In the just completed third quarter, it closed on its acquisition of the U.K. snacks maker Tyrrell, which it bought for $391 million, paid for with a $650 million credit facility it raised in August of this year.
In addition, it's filled out its product portfolio with brands such as Paqui, a tortilla chip maker, and Oatmega.
However, the company has stubbed its toe occasionally in managing those operations. Its sales force apparently botched a merchandising opportunity in the quarter. According to research from D.A. Davidson, the company missed "key retailer reset windows in the second half" of the year.
A host of analysts came out with critical research notes in the wake of the third quarter earnings release. While learning after the 25% selloff that - oops - you shouldn't have been holding this stock is of dubious benefit - Wall Street's often-made attempt to close the barn doors after the horses have fled - it doesn't look good for the short-term perspective on the stock.
In branded products, problems don't tend to be one-quarter phenomena but rather serial missteps. Whether it's management shortcomings or sales force execution, flubbing the uptake with retail partners isn't something that goes away overnight. Amplify was credited with having solid relationships with retailers such as Target (TGT) - Get Report and Wal-Mart (WMT) - Get Report , but if it's not living up to the construction of those relationships, it's going to be problematic.
Amplify isn't especially expensive, trading at about 23 times forward P/E, not bad for an emerging growth company that has a scant chunk of the snack food market, suggesting a lot of room before it hits its ceiling. The bigger question, as it resets expectations for the balance of the year, is whether it gets to battle as a standalone company, or whether its financial sponsors figure whether a sale to a strategic - the Frito-Lay division of Pepsico (PEP) - Get Report perhaps, which already has some products in the better-for-you category? - would be the better option for the company.