MGP Ingredients, Inc. MGPI posted third-quarter 2024 results, wherein the top line met the Zacks Consensus Estimate, while the bottom line surpassed the same. However, the company’s sales and earnings decreased year over year.
The third-quarter performance is prompting strategic adjustments in response to softening trends in the American whiskey category and high barrel inventories. Plans for 2025 include lowering net aging whiskey put away, reducing whiskey production and optimizing the cost structure to address decreased production volumes, which are expected to significantly affect sales and profitability in the Distilling Solutions segment.
Despite these challenges, ongoing investments in the brand portfolio are anticipated to drive organic growth and strengthen the long-term competitive positioning of the brown goods business. Furthermore, stronger performance is expected in the Ingredient Solutions segment in 2025, even amid current transitory headwinds.
MGP Ingredients, Inc. Price, Consensus and EPS Surprise
MGP Ingredients, Inc. price-consensus-eps-surprise-chart | MGP Ingredients, Inc. Quote
MGPI’s Quarterly Performance: Key Insights
MGPI posted adjusted earnings of $1.29 per share, which surpassed the Zacks Consensus Estimate of $1.27. However, the bottom line decreased from $1.34 in the year-ago quarter.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
Total sales of $161.5 million decreased 23.7% year over year. Excluding the impact of the Atchison distillery, total sales declined 14% year over year. This reflects lower sales in each of the three operating segments.
Gross profit was $65.8 million, down 10.4% year over year. We note that the adjusted gross margin increased 30 basis points (bps) year over year to 40.8%, mainly due to significant margin growth in the Branded Spirits segment.
Advertising and promotion expenses rose 1.5% year over year to $9.6 million. Corporate selling, general, and administrative (SG&A) expenses decreased 20.2% year over year to $17.2 million.
Adjusted EBITDA was $45.7 million, down 8.8% year over year. The company’s adjusted EBITDA margin increased 460 bps year over year to 28.3%.
MGP Ingredients’ Q3 Segmental Details
Sales for the Zacks Rank #5 (Strong Sell) company’s Distilling Solutions segment fell 36% year over year to $71.9 million. Excluding the impact of the Atchison distillery, the segment’s sales declined 18%, primarily due to a 22% drop in brown goods sales, which included lower sales of aged and new distillates. Reported segment gross profit decreased 14% year over year to $28.6 million.
Sales in the Branded Spirits segment decreased 6% year over year to $62.6 million, mainly due to a decline in sales from the mid and value-priced portfolio. However, premium plus sales increased 1% as the company continued to implement targeted initiatives in the American whiskey and tequila categories. Gross profit for Branded Spirits rose 12% to $32.4 million.
The Ingredient Solutions segment experienced an 18% decrease in sales, totaling $26.9 million, primarily due to the ongoing impact of a stronger U.S. dollar on its specialty protein sales as well as reduced sales volume of commodity wheat starches amid heightened domestic competition.
Gross profit fell 57.5% to $4.7 million. Excluding the effects of the Atchison distillery and the related intercompany credit for the waste starch slurry by-product, gross profit decreased to $4.7 million from $9.4 million in the third quarter of 2023.
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MGPI’s Financial Health Snapshot
The company ended the reported quarter with cash and cash equivalents of $20.8 million, long-term debt (less of current maturities) of $87.8 million and total equity of $912.9 million.
MGP Ingredients’ 2024 Outlook
The company expects 2024 sales to be between $695 million and $705 million, following the closure of the Atchison distillery in December 2023. It reported total sales of $836.5 million in 2023. Adjusted EBITDA is projected to be in the range of $196- $200 million, which includes the addition of share-based compensation expenses.
MGPI anticipates adjusted earnings to be in the range of $5.55-$5.65 per share. The company reported adjusted earnings of $5.90 per share in 2023. Total capital expenditures for the full year are estimated at $78 million.
The stock has lost 44.8% in the past three months compared with the industry’s 0.5% decline.
Key Picks
Here, we have highlighted three better-ranked stocks in the broader consumer staple sector, namely BRF Brasil Foods SA BRFS, Vital Farms Inc. VITL and Ingredion Incorporated INGR.
BRF Brasil Foods, formerly Perdigao S.A., is a Brazil-based food company. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BRFS has a trailing four-quarter average earnings surprise of 73.8%. The Zacks Consensus Estimate for current financial-year earnings and sales indicates growth of 256.7% and 14.7%, respectively, from the year-ago reported numbers.
Vital Farms offers a range of produced pasture-raised foods. It sports a Zacks Rank of 1 at present.
The Zacks Consensus Estimate for Vital Farms’ current financial-year earnings and sales indicates growth of 88.1% and 27%, respectively, from the year-ago registered numbers. VITL has a trailing four-quarter average earnings surprise of 82.5%.
Ingredion is an ingredients solutions provider, specializing in nature-based sweeteners, starches and nutrition ingredients. The company currently carries a Zacks Rank #2 (Buy). INGR has a trailing four-quarter earnings surprise of 11%, on average.
The Zacks Consensus Estimate for INGR’s current financial-year earnings indicates growth of 6.7% from the year-ago reported number.
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