This Analyst Remains Bullish On BellRing Brands As Setup For FY23 Is 'Strong' - BellRing Brands (NYSE:BRBR)

Needham analyst Matt McGinley reiterated a Buy rating on the shares of BellRing Brands Inc BRBR with a price target of $32.
The company’s Q1 sales were $362.7 million, with Premier Protein growing 22.9%, Dymatize up 2.5%, offset by a (19)% decline in volume as pricing offset volume decline driven by discontinued products, said the analyst.
With high-single-digit pricing taken on Premier, the analyst expects pricing to be the primary driver of FY2Q growth, but with production capacity constraints easing, volume gains from the reintro of temporarily discontinued flavors might arrive in 2Q rather than 3Q, as previously assumed, added the analyst.
The analyst said that the gross margin improved 350 basis points to 33.6%, driven by pricing that more than offset input inflation and from cycling higher distro costs.
The analyst expects Q1 to be the peak for gross margin %, with slow decline in rate as pricing partly rolls off in 1H and more normal trade spending resumes in 2H.
The analyst estimates that the long-term growth algorithm can support 10-12% organic topline growth and an EBITDA margin of 18-20%.
Sticky retail distribution combined with trade and advertising support create predictable recurring revenue streams, while strong category trends drive high rates of organic growth, added the analyst.
BellRing's brand portfolio, consisting of Premier Protein (RTD Shakes) and Dymatize (Protein Powder), covers the bulk of consumer protein beverage needs and sits in a rapidly growing convenient nutrition category, said the analyst.
BellRing utilizes a contract manufacturing network that requires little to no capital investment contributing to strong FCF generation that provides the capacity to fund growth via acquisitions and the ability to pay down debt or execute share buybacks, the analyst commented.
Price Action: BRBR shares are trading higher by 5.30% at $30.27 on the last check Tuesday.

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