Update: Annie's Earnings

Aug. 9.14 | About: Annie's, Inc. (BNNY)

Summary

The company beat consensus on the top line but managed to miss by a wide margin on the bottom line.

Shares have fallen to our price target and are still worth avoiding for the near term.

We felt that the company was in for a string of earnings misses due to rising competition, which is what’s happening.

Annie's (NYSE:BNNY) posted fiscal 1Q earnings that had EPS coming in at a negative $0.06, versus consensus for a negative $0.03. But it did marginally beat consensus on the top line. It's worth noting that its EPS numbers included $0.03 a share in stock-based compensation charges and $0.03 in professional services fees. Shares are down nearly 12% over the last month.

Annie's did reaffirm its full year EPS guidance of between $0.88 and $0.95. Consensus stands at $0.90. The biggest weakness in the quarter was due to a continued reduction of inventory by its customers. We feel this is due to the rising competition of organic foods.

We first profiled Annie's back in October. Since then shares are down nearly 40%. Shares are now trading right at our $28 price target. Although shorting the stock at these levels isn't advisable, it's still worth avoiding the company. As we noted back in October,

For a few years Annie's enjoyed the benefits of being one of the pioneers of the organic foods industry. Over the past five years, Annie's has seen sales grow 17% CAGR. However, as with any 'hot' industry, it attracts major competition. As a result, Annie's is seeing its first mover advantage quick deteriorate...bigger, better capitalized companies, are falling all over themselves to get in on the action.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.