Fever-Tree shares rise following upbeat earnings report

Investing.com -- Shares of Fever-Tree (LON:FEVR) edged up 1.22% on Tuesday pre-market, as the premium mixer company reported a revenue increase of 2% on a constant currency basis year-on-year (YoY), reaching £368.5 million.

The growth was largely attributed to a strong performance in the United States, where revenue surged by 12% YoY to £128 million, especially accelerating in the second half of the year despite a challenging market environment.

The UK-based company experienced a decline in its domestic market, with UK revenue falling 4% to £111.0 million. Revenue from Europe remained flat at £92.7 million, while the rest of the world (ROW) saw an impressive 22% increase on a constant currency basis to £32.2 million.

Fever-Tree’s gross profit soared by 18% YoY to £138.4 million, reflecting a robust gross margin of 37.5%. This figure slightly surpassed the Visible Alpha consensus (VA Cons) of £140 million or 38%.

Adjusted EBITDA increased by 66% YoY to £50.7 million, aligning with the VA consensus of approximately £50.5 million. The adjusted EBITDA margin stood at 13.7%, which is a significant improvement of 530 basis points over the previous year.

The company recognized £5 million in exceptional items due to costs associated with winding down a bottling relationship in the US and advisory fees tied to the Molson Coors (NYSE:TAP) partnership. Despite these costs, diluted adjusted earnings per share (EPS) were 28.01p, slightly ahead of the VA consensus at 26.5p.

Fever-Tree’s net cash position strengthened, showing a 60% YoY increase to £96 million. The dividend was raised to 16.97p per share, marking a 2% YoY increase.

Looking ahead, the company’s outlook and guidance remain unchanged from the January trading update. The completed initial transaction with Molson Coors, which now owns an 8.5% stake in Fever-Tree, is expected to reduce the company’s working capital requirements in the US over time.

However, there will be an initial period of investment for growth, with increased marketing spend behind the brand.

For 2025, Fever-Tree anticipates low single-digit revenue growth as the US partnership gets established, with a short-term negative impact on EBITDA. A Group adjusted EBITDA margin of around 12% is projected for 2025.

By 2026, the company expects both revenue and EBITDA to grow in double digits, accompanied by a significant boost in US marketing expenditure. Over the medium term, as the Molson Coors partnership matures, significant growth in revenue and EBITDA is anticipated.

RBC analysts commented on the update, stating, "We expect the focus will now be on the new Molson Coors partnership which underscores the strength of the brand in the US. FEVR products will now be leveraged through a national supply chain network, providing scale and increased brand identity."

"After a transition period, we expect an acceleration in revenue and profit growth in the US, FEVR’s largest potential market."

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