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National Beverage Is Heating Up

Mar. 10, 2020 3:45 PM ETNational Beverage Corp. (FIZZ) Stock1 Comment
Detroit Bear profile picture
Detroit Bear


  • Revenue improved at National Beverage in Q3'20, though performance remained below the company's high water mark.
  • Cost controls seem to be working, creating some operating margin expansion.
  • The company still generates strong free cash flow, and shares are relatively inexpensive versus more established and high growth companies.
  • If revenue growth returns to the mid-single digits, I may be tempted to start a position.

Shares of LaCroix parent company National Beverage Corporation (NASDAQ:FIZZ) have held up relatively well amongst a broader market selloff. Over the past month, shares are up a little over 2% versus a 17% decline in the S&P 500. Since early February, we’ve heard some positive news from the company, including a victory in the court case challenging LaCroix’s “natural ingredient label,” as well as positive quarterly results. Management claimed sales of LaCroix grew in Q3’20, after a 3% decline in calendar year 2019 sales, per estimates.

However, I am not entirely certain that National Beverage is back to being a Buy. Let’s take a look at the company’s recent performance, competitive dynamics, and why I find National Beverage on my watch list once again.

Financial Performance: A Relief

National Beverage’s third quarter earnings were actually a relief. Revenue grew nearly 1% y/y to $222 million. While this remains below the Q3’18 high water mark of $227 million, it is the first quarter of positive revenue growth since Q1’19. Gross margin actually ticked up 30 basis points y/y to 36.8%, and SG&A declined 50 basis points y/y to 21.9% as the company reduced actual spending by about 1.3%. Consequently, operating margin grew 90 basis points y/y to 14.9% of sales, leading to EPS of $0.57, up 7.5% y/y.

From a P&L perspective, I consider this a step in the right direction, though it is important to remember that gross margin and operating income remain well below Q3’18 figures of 40.1% and 20.1%, respectively. I believe this implies a decline in average selling price for LaCroix, causing the company to discount to avoid losing too much share.

Unfortunately, this is the reality of the situation for LaCroix. Pepsi (PEP) and now Coke (KO) have entered the market with far

This article was written by

Detroit Bear profile picture
A bear out in the woods.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (1)

22thoroughbred profile picture
The co is buying shares once it hits $39-$40 which is wonderful support, I hope they have more cash avail.
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