HANOVER, Pa. - Utz Brands, Inc. (NYSE: UTZ), a prominent U.S. manufacturer of branded salty snacks, reported a robust second quarter, surpassing analyst expectations with an earnings per share (EPS) of $0.19, which was $0.03 higher than the consensus estimate of $0.16.
The company's revenue for the quarter also exceeded forecasts, coming in at $365.2 million against the anticipated $356.49 million. Following the earnings release, Utz's stock price increased by 1.75%.
In the second quarter of 2024, Utz achieved a net sales increase of 1.6% on an organic basis, reflecting the company's continued momentum in the salty snack category. This growth was driven by a combination of increased volume/mix, up by 2.3%, and partially offset by a slight decline in net price realization. The company's power brands, including Utz®, On The Border®, Zapp's®, and Boulder Canyon®, played a significant role in this expansion, with retail sales for these brands rising by 2.8%.
Gross profit margins saw a notable improvement, expanding by 260 basis points (bps) to 35.0%, while adjusted gross profit margins also increased by 260 bps to 37.6%. This margin growth was attributed to productivity benefits and favorable sales volume/mix, which more than compensated for supply chain cost inflation and investments in productivity initiatives.
Utz's net income for the quarter stood at $25.4 million, a significant turnaround from the net loss of $8.6 million reported in the same period last year. Adjusted net income saw a 46.3% increase to $27.5 million, and adjusted EBITDA grew by 10.0% to $49.7 million, or 14.0% of net sales.
Looking ahead, Utz has modestly revised its fiscal year 2024 outlook for organic net sales growth to approximately 3%, citing a more moderate growth outlook for the salty snack category. Despite the sale of the Good Health® and R.W. Garcia® brands, which is expected to impact net sales by approximately $45 million, the company anticipates organic net sales growth driven by volume, supported by increased marketing investments, product innovation, and distribution gains.
The company reaffirmed its adjusted EBITDA growth outlook of 5%-8% and raised its adjusted earnings per share growth forecast from 23%-28% to 28%-32%. This improved growth rate expectation is due to a more favorable effective tax rate and lower core depreciation and amortization expense following the company's plant divestitures in April 2024.
Utz's CEO, Howard Friedman, expressed satisfaction with the company's strong performance, stating, "We made necessary adjustments to our promotional activities during the quarter to address consumer value expectations. Our accelerated productivity cost savings provide us the flexibility to both continue to expand our margins and increase investments behind our brands to support our geographic expansion. We expect our growth opportunities will drive strong volume growth in the second half of the year."
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