Index falls as earnings results weigh; pound above $1.33, Bodycote soars
Investing.com - UBS maintained its Sell rating and $65.00 price target on Freshpet (NASDAQ:FRPT) ahead of the company’s second-quarter earnings report scheduled for Monday, August 4. The stock, currently trading at $70.76, has experienced a significant decline of 55.9% over the past six months and is trading near its 52-week low of $66.75, according to InvestingPro data.
The investment firm believes the risk-reward outlook for the earnings announcement "still leans slightly negative," though it acknowledges the situation has become "a bit more balanced" as 2025 projections have been reduced. UBS anticipates Freshpet will deliver relatively in-line second-quarter results. InvestingPro analysis shows the company trading at a high P/E ratio of 219.28, with analysts setting a wide target range between $65 and $158, suggesting mixed views on valuation.
UBS expects both top and bottom-line guidance for fiscal year 2025 to be revised downward, with the magnitude of these revisions likely determining market sentiment following the announcement. The firm suggests that if investors become confident about accelerated growth exiting 2025, supporting the current expectations of 16-17% net sales growth for 2026, the earnings report could positively impact the stock.
Conversely, UBS warns that any commentary indicating merely stabilized or decelerated growth toward year-end would likely trigger a negative market reaction, especially given "concerns around competition are more clear and present" following General Mills (NYSE:GIS)’ plans to re-enter the pet food category.
UBS maintains its bearish stance on Freshpet, continuing to "see downside from current levels" as the stock appears to be priced for mid-to-high teens revenue growth over the coming years, compared to UBS’s expectation of low double-digit percentage growth.
In other recent news, Freshpet reported its first-quarter 2025 financial results, revealing a revenue of $263 million, which marked an 18% increase compared to the previous year and exceeded the forecasted $258 million. This growth was driven by a 14.9% rise in volume and a 2.7% increase in price/mix. Freshpet’s adjusted gross margin improved to 45.7%, surpassing consensus estimates by 280 basis points, thanks to lower input costs and better quality metrics. Despite incurring one-time charges of $16.8 million, the company’s adjusted earnings per share were $0.08, slightly below the expected $0.10.
Analysts have varied opinions on Freshpet’s prospects. UBS initiated coverage with a sell rating, expressing concerns about overly optimistic growth expectations. Meanwhile, Stifel resumed coverage with a buy rating, highlighting long-term growth potential despite current challenges. TD Cowen downgraded Freshpet from Buy to Hold due to slowing retail sales growth, while Benchmark maintained a Buy rating but lowered the price target to $120, following the company’s operating results. Additionally, Freshpet shareholders approved all proposals at the recent annual meeting, electing all director nominees to the board.
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