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Weber Set to Gain From Rival's Stumble

Grill maker heating up after Traeger misses on earnings.

It’s no secret that some stocks benefit when a rival stubs its toe during earnings season.

So it goes with Weber Inc.  (WEBR) - Get Weber, Inc. Class A Report, which should benefit from a competitor’s lousy Q3 earnings report.

“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.”

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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.”

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