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.
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