Update: J&J Snack Foods Earnings

Aug.10.14 | About: J & (JJSF)


The company beat consensus estimates on the top and bottom lines.

Our long-term thesis is still intact at the company given the rise in consumer spending.

We noted in our initial coverage that the company should start beating earnings as its products gained traction.

J&J Snack Foods (NASDAQ:JJSF) managed to post earnings that beat consensus by nearly 5%. Its fiscal 3Q EPS came in at $1.26 (versus $1.20 consensus) and revenues were $257 million (whereas consensus was $243 million). On a year over year basis, sales were up 8% and earnings were up 12%.

We first profiled J&J back in September. Shares are up 20% since then. We're still a few percentage points below our $100 price target. The company still has negligible debt and trades at an 12x EV/EBITDA multiple (below its peer average of 15x).

The company noted the strength in its soft pretzel and ICEE products. Its pretzel line was drive by pretzel rolls and sticks. Recall, we noted that Wendy's use of the pretzel bun was a big positive for J&J. As we noted in September,

As far as future growth, some of the big tailwinds we see for the company include a rise in discretionary spending. The rise in spending should allow consumers to throw more money toward snacks. As well, we believe that a rebounding economy will increase mall traffic, convenience store traffic and visits to professional sporting events, and ipso facto, so increases the demand for J&J's snacks.

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