Freshpet's stock jumps toward a multiyear high after an unexpected quarterly profit

By Tomi Kilgore

Sales soared 40% and gross margin improved by more than 9 percentage points

Freshpet's stock ran up in premarket trading Monday, heading toward a high not seen since 2021, after the dog- and cat-food company reported a surprise first-quarter profit, citing to higher sales, improved gross margin and lower logistics costs.

"The strength of the Freshpet business model and consumer proposition continue to drive the robust net sales growth investors have come to expect from us, and our intense focus on operational improvements is delivering the margin expansion we knew we could achieve with additional scale," said Chief Executive Billy Cyr.

The stock (FRPT) was up 13.2% in the premarket, putting it on track to open around the highest prices seen since November 2021.

The company swung to net income of $18.5 million, or 37 cents a share, from a loss of $24.8 million, or 52 cents a share, in the same period a year ago. That compared with the FactSet consensus for a per-share loss of 22 cents.

It also marked the first back-to-back quarters with net income - the company had earnings per share of 31 cents in the fourth quarter - since the second and third-quarters of 2020.

"While we are very bullish on our prospects for continued profit improvement, our focus now is on delivering consistently strong performance," Cyr said.

Sales jumped 39.6% to $223.8 million, above the FactSet consensus of $216.4 million, helped by a 30.6% increase in volume.

Cost of goods sold rose by less than half of sales, up 16.2% to $135.7 million, to boost gross margin to 39.4% from 30.3%.

The company affirmed its 2024 sales outlook of "at least" $950 million, and raised its guidance for adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) to at least $120 million from $100 million to $110 million.

The stock has rallied 26.3% year to date through Friday while the S&P 500 has gained 7.5%.

-Tomi Kilgore

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05-06-24 0711ET

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