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Amplify Snack Brands' Margin Hiccup Was 'Explained Away,' According To D.A. Davidson

Amplify Snack Brands' Margin Hiccup Was 'Explained Away,' According To D.A. Davidson

After the market closed Monday, Amplify Snack Brands Inc (NYSE: BETR) reported first-quarter earnings of $0.13, in line with the Street’s expectations, on revenue of $54.3 million, up 22.7 percent year-over-year, and $360K above consensus estimates. However, D.A. Davison’s Eric M. Gottlieb was disappointed, as the firm was anticipating earnings of $0.15 per share.

In a report issued after the earnings call, the expert explained that approximately $0.01 of the miss could be attributed to a higher share count.

Nonetheless, it was not only EPS that missed DA Davidson’s expectations. Gross margins of 52.2 percent, also came in 31O basis points below the firm’s estimate, mainly due to higher promotional activity, mostly for the SkinnyPop brand. But, it should be noted that margins tend to be lower in the first quarter of each year, as promotional activity spikes in response to the January dieting season.

Related Link: DA Davidson Sets $30 Five-Year Price Target On Amplify Snack Brands

Having explained the margin hiccup, analysts at D.A. Davidson decided to reiterate a Buy rating and $18 price target on shares of Amplify Snack Brands, citing the continued expansion in SkinnyPop’s market share, mindshare and household penetration; and the fact that the brand “is still in high growth mode and plays in one of the highest growth, highest margin, on-trend food subsectors.”

Finally, the research note pointed out, experts at DA Davidson believe Amplify stands as an attractive acquisition target for larger packaged food companies seeking to acquire a top snack brand.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

Latest Ratings for BETR

Nov 2017Initiates Coverage OnHold
Nov 2017DowngradesBuyHold
Oct 2017MaintainsBuy

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