With MGP Ingredients, Inc. MGPI set to announce its third-quarter fiscal 2024 earnings results on Oct. 31, 2024, before market open, investors are closely tracking the company's performance. Recent preliminary results indicated disappointing sales figures, prompting management to revise its 2024 guidance downward. This news hurt investor confidence, leading to a 24.2% drop in MGPI shares during Friday's trading session.
Management acknowledged sluggish trends in the alcohol spirits category and high industry-wide whiskey inventories. These challenges have placed unexpected pressure on the brown goods business. Furthermore, the company expects these industry headwinds to persist throughout the remainder of the year.
Shares of MGP Ingredients have declined 26.6% in the past month against the industry’s rise of 1.8%.
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MGPI Issues Soft Preliminary Q3 Financials
In light of these challenges, MGPI anticipates a 24% year-over-year decline in net sales to reach $161.5 million. When excluding the impacts of the Atchison distillery, sales are expected to decline 14%.
The Distilling Solutions segment is projected to face a 36% drop in sales, including a 22% decline in brown goods sales. The Branded Spirits segment sales are expected to see a 6% decrease, although premium plus sales are forecast to grow 1%. Meanwhile, sales in the Ingredient Solutions segment are anticipated to fall 18%.
For the third quarter, net income is expected to surge 82% to $23.9 million, resulting in earnings per share (EPS) of $1.07. In contrast, adjusted net income is projected to decline 5% to $28.8 million, with adjusted EPS also anticipated to decrease 5% to $1.29. Adjusted EBITDA is forecast to drop 9% to $45.7 million.
MGPI’s Trimmed Full-Year Outlook
MGP Ingredients has lowered its fiscal 2024 outlook from the one provided during the second-quarter earnings call. The company anticipates net sales between $695 million and $705 million, decreasing from the previous estimate of $742-$756 million. Adjusted EBITDA is expected to be $196-$200 million, down from the earlier projection of $218-$222 million.
MGPI envisions adjusted basic EPS between $5.55 and $5.65 for fiscal 2024, declining from the earlier estimate of $6.12 to $6.23. Capital expenditure is projected to be $78 million, down from the prior forecast of $85 million.
MGPI's Plans for Future Resilience
The American whiskey category has adeptly managed supply-demand fluctuations. MGP Ingredients is taking strategic measures to bolster its brown goods business. The company’s shift toward becoming a branded spirits company is gaining momentum, bolstering confidence in its strong long-term growth potential.
MGPI’s Investment Analysis
MGP Ingredients’ muted preliminary results for the third quarter and downward revisions to its outlook have left investors apprehensive about the stock. However, the company's proactive measures to strengthen MGPI’s brown goods business and pivot toward branded spirits offer a glimmer of hope, justifying its Zacks Rank of #2 (Buy).
Other Stocks to Consider
Here, we have highlighted three more top-ranked stocks, namely The Chefs' Warehouse, Inc. CHEF, Flowers Foods, Inc. FLO and McCormick & Company, Incorporated MKC, currently carrying a Zacks Rank # 2 each. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chefs' Warehouse together with its subsidiaries, distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. CHEF has a trailing four-quarter earnings surprise of nearly 33.7%, on average.
The Zacks Consensus Estimate for Chefs' Warehouse’s current quarter’s sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Flowers Foods produces and markets packaged bakery food products in the United States. FLO delivered an earnings surprise of 1.9% in the last reported quarter.
The Zacks Consensus Estimate for Flowers Foods’ current-financial year’s sales and earnings implies growth of 1% and 5%, respectively, from the year-ago reported numbers.
McCormick & Company manufactures, markets and distributes spices, seasoning mixes, condiments and other flavorful products to the food industry. MKC has a trailing four-quarter earnings surprise of around 13.8%, on average.
The Zacks Consensus Estimate for McCormick & Company’s current-financial year’s sales and earnings suggests a rise of 0.6% and 8.2%, respectively, from the year-earlier reported figures.
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