Evercore highlights 15%+ organic sales growth as BellRing stock earns Outperform rating

On Wednesday, Evercore ISI updated its outlook on BellRing Brands (NYSE: NYSE:BRBR), increasing the price target to $78 from the previous $70, while maintaining an Outperform rating on the company's stock. The firm's positive stance is based on BellRing's impressive year-to-date performance, which saw the stock climb by 29%, driven by robust organic sales and EBITDA growth in fiscal year 2024.

The analyst from Evercore ISI highlighted BellRing's 20% organic sales growth and 30% EBITDA growth in FY24, along with an expanded EV/EBITDA multiple, which currently stands at 20 times FY25 estimated. For fiscal year 2025, the firm expects BellRing to continue its strong revenue trajectory, projecting a 15.5% growth in enterprise value to revenue (EVRe), which is above both the consensus estimate of 12% and the company's own guidance of 12%-16%.

The growth forecast is attributed to several factors, including increased distribution, particularly in Food/Mass channels, an enhanced product assortment with new pack sizes and flavors, and a significant advertising spend increase of over 30%. The successful performance of the Premier Protein brand and the rising consumer demand for protein-centric meal solutions further solidify Evercore ISI's confidence in the company's ability to sustain over 15% organic sales growth.

Despite the challenges posed by higher inflation and increased advertising costs, which are expected to constrain EBITDA, Evercore ISI anticipates a 7% upside to the newly set $78 price target. This figure is reflective of the estimated EBITDA growth for the next year, with EVRe at 11%, compared to a consensus of 6% and company guidance ranging from 5% to 11%.

The valuation target of 20 times EV/EBITDA is justified by BellRing's comparison to similar high-growth beverage peers and is supported by a discounted cash flow (DCF) analysis. This analysis takes into account the benefits of the company's superior organic growth, high returns on invested capital (ROIIC), and free cash flow (FCF) conversion, all underpinned by its asset-light business model and strategic value.

In other recent news, BellRing Brands has been the center of attention due to a series of upgrades from multiple financial firms. Barclays (LON:BARC) raised its price target for BellRing from $74 to $79, maintaining an Overweight rating, in light of the company's preparation for increased supply of Premier Protein products.

BofA Securities also maintained a Buy rating and increased its price target to $82 following the company's stronger than expected fourth quarter results for fiscal year 2024. Similarly, Stifel reaffirmed a Buy rating and increased the stock's price target to $81, citing the company's impressive Q4 performance. Truist Securities increased its target to $75, reflecting updated financial estimates for fiscal years 2025 and 2026.

Deutsche Bank (ETR:DBKGn) maintained a Buy rating and increased its price target to $77 due to BellRing's strong fiscal year 2025 outlook, while Citi raised its target to $83, highlighting strong demand for the company's shake products. These recent developments follow BellRing Brands' reported revenue of $555.8 million and an Adjusted EBITDA of $116.5 million. The company also purchased 1.3 million shares for $74 million and retains a $216 million share repurchase authorization.

InvestingPro Insights

BellRing Brands' strong performance, as highlighted by Evercore ISI, is further supported by real-time data from InvestingPro. The company's revenue growth of 19.76% over the last twelve months aligns with the analyst's projections of robust organic sales growth. Additionally, BellRing's impressive EBITDA growth of 34.11% over the same period reinforces the positive outlook on the company's financial health.

InvestingPro Tips reveal that BellRing is trading at a low P/E ratio relative to its near-term earnings growth, with a PEG ratio of 0.75. This suggests that the stock may be undervalued considering its growth prospects, which could support Evercore ISI's bullish stance. Furthermore, the company's strong return over the last three months, with a price total return of 32.67%, reflects the market's positive sentiment towards BellRing's performance and future potential.

For investors seeking more comprehensive analysis, InvestingPro offers 15 additional tips for BellRing Brands, providing a deeper understanding of the company's financial position and market performance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.