Boulder Brands (NASDAQ:BDBD) managed to post 2Q earnings of $0.05 a share (meeting consensus) and revenues of $131 million (marginally beating consensus). Shares have soared 15% since earnings, but full-year 2014 earnings consensus remained the same and 3Q EPS consensus has decreased by 9% over the last week.
Sales for 2Q were up 18.7% y/y, but operating income was down 19.9%. The company noted that its first half 2014 weakness was driven by elevated egg-white prices, which are now locked in for the next year.
Since we first covered Boulder Brands back in September of last year, shares are down over 20%. At the time, we put an $8 price target on the company -- we still have 40% downside to that level. Its valuation (on a forward P/E and P/S basis) is now more reasonable, but as we noted in September,
We feel that BDBD is not the perfect growth story that management would like us to believe. The company is facing a number of headwinds including:
Slowdown in its Smart Balance business.
The encroachment by larger food companies into the gluten-free segment.
A gluten-free diet is not for the general population, but only for those for celiac disease or gluten sensitivity.
- The company is looking to adopt a growth via acquisition strategy and lacks the financial resources to continue making large, transformative acquisitions. Evidence of this is the acquisition of Level Life Foods which has less than $1 million in sales and the company claims to have products for 106 million Americans with diabetes.
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