Shares Of National Beverage Corp. Continue To Bubble Up, Plenty Of Runway Ahead

National Beverage Corp. (NASDAQ:FIZZ) reported robust third-quarter results ahead of the estimates on both sales and profit.

Credit Suisse’s Laurent Grandet maintains an Outperform rating on the company, while raising the price target from $75 to $60.

Q3 Results

National Beverage’s sales grew 20 percent during Q3, driven by LaCroix, while gross margins expanded 650 bps, representing the third successive quarter of meaningful gross margin mix benefit.

“We continue to think that LaCroix has plenty of growth runway ahead and that operating margins still have upside,” Grandet mentioned.

The analyst pointed out that LaCroix has higher margins than the rest of National Beverage’s business, which helps it grow at a pace of over 60 percent to become a larger contributor, benefiting from both margins and sales mix.

Runway For Growth

“LaCroix currently has around 65 percent ACV with a muted presence in c-stores. In our view, this channel is one of the more difficult to penetrate and supply given its highly fragmented nature,” Grandet stated.

The analyst believes that there could be meaningful upside if National Beverage partnered with a distributor to expand LaCroix, particularly in c-stores.

“The additional margin provided by the c-store channel would compensate in our view for the additional cost a third party would likely charge for the service,” Grandet explained.

The EPS estimates for FY 2017, 2018 and 2019 have been raised.

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