It’s no secret that some stocks benefit when a rival stubs its toe during earnings season.
“High-end grill maker Traeger Inc. (COOK) got grilled Tuesday, falling nearly 16% after reporting third-quarter earnings that were worse than expected,” said Jonathan Heller in Real Money. “While revenue of $162 million was actually $21 million ahead of the consensus, the quarterly loss (adjusted) of nine cents a share was three cents worse than consensus.”
Traeger had been outperforming after its IPO kicked in last July with an $18 share price. “The stock hit the mid-$32 range within two weeks of the initial public offering and closed Tuesday at $16.57,” Heller said. “COOK currently trades at just under 25x next year's consensus estimates.”
Yet Traeger’s pain is Weber’s gain.
“The thing that was more interesting was Tuesday's action in fellow grill maker Weber Inc., which dropped about 7% on no company-specific news but likely in sympathy with COOK,” Heller added. “Weber went public at $14 a share just five days after Traeger's debut, rose above $20 intraday in its first week of trading, and closed Tuesday at $14.57.”
Weber recently initiated a four-cent quarterly dividend, which implies a 1.1% forward dividend yield. “Its shares currently trade at 23x next year's consensus estimates of 62 cents a share, with a healthy amount of analysts (eight) covering the name,” he said..
Heller says he is “warming” to Weber right now.
“Some might call it a busted IPO, but that terminology might be a bit strong in this case,” Heller said. “It’s a very well-known brand name and I am partial to its products, including the Weber grill that has been in my backyard for the last 20 years. Weber in my view produces high-quality products.”