Shares of Freshpet (NASDAQ: FRPT) were barking up a tree this week as the maker of perishable dog and cat food delivered a strong fourth-quarter earnings report with a solid improvement in profitability and another quarter of strong revenue growth.
As of Thursday's close, the stock was up 23% for the week.
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Freshpet gets a bone
Freshpet's revenue in the quarter rose 29.9% to $215.4 million, well ahead of the analyst consensus of $204.4 million. The company marked its sixth straight year of revenue growth above 25%, showing that demand continues to grow for alternatives to packaged dry food as Freshpet expands its footprint into new supermarkets and pet stores.
On the bottom line, the company also said its recent investments in manufacturing, infrastructure, and supply chain, like Kitchens 2.0, are paying off. Freshpet's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) jumped from $18.8 million to $31.3 million in the quarter.
The company also flipped a generally accepted accounting principles (GAAP) net loss of $2.9 million to a profit of $15.3 million, or a per-share profit of $0.31. That also crushed the average analyst estimate of just $0.05.
CEO Billy Cyr summed up the performance, saying, "Our strong 2023 results demonstrate that Freshpet has reached an inflection point: The significant investments we have made to create scale and extend our first mover advantage have begun to generate improved profitability and significant operating cash flow."
Wall Street generally cheered the results, with several analysts raising their price targets on the stock, noting the company has demonstrated a competitive advantage and is beginning to show operating leverage in its business model. The results are also encouraging as they come when much of the pet food industry is struggling after a slowdown following the pandemic boom. Freshpet has maintained its strong revenue growth and accelerated its market share gains.
What's next for Freshpet
Freshpet also impressed the market with its guidance for 2024. The company sees revenue of at least $950 million this year, representing growth of at least 24%, which compares to the consensus at $954.2 million. It also forecasted an adjusted EBITDA of $100 million-$110 million, up from $66.6 million in 2023.
Freshpet stock is still expensive, but the company's long track record of delivering growth quarter in and quarter out and improving margins shows that it's worth paying a premium for. The pet stock looks like a good bet to move higher from here.
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Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Freshpet. The Motley Fool has a disclosure policy.
