Mizuho initiated coverage on Utz Brands, Inc. (UTZ) with a Buy rating and set their 12-month price target on the stock at $19.00.
Mizuho analysts believe the American snack food company provides investors with a favorable opportunity to tap into the enduring growth of U.S. snacking through a pure-play portfolio in salty snacks, which, according to a recent Mizuho survey, is the preferred variety among consumers.
“UTZ is the only publicly-traded, pure-play in the $38 billion U.S. salty snacks industry.” Wrote analysts in a note.
The analysts anticipate that the salty snack segment can maintain a steady normalized growth rate of approximately +3%, evenly distributed between volume and pricing/mix. Additionally, they foresee UTZ positioned to expand its market share through strategic mergers and acquisitions that leverage synergies, as well as through organic growth initiatives.
Mizuho believes that UTZ is poised to gain market share through M&A and organic investments, extending geographic access while securing new sub-categories and product capabilities.
Since 2011, UTZ has closed nearly 20 acquisitions with strong synergies at very attractive valuations.
The snack company also plans to boost profit margins starting in 2024 through improved efficiency in trade promotions, package sizes, manufacturing, supply chains, and operational costs.
The company’s efforts are expected to increase the EBITDA margin to around 16% by 2026, with a potential for further growth of at least 100 bps due to increased sales volume and cost savings.
Shares of UTZ are up 0.16% in early trading Wednesday morning.