Simply Good Foods Rise 8.6% as Q4 Results Top Estimates

The Simply Good Foods Company (SMPL) has reported better-than-expected fourth-quarter Fiscal 2021 results (ended August 28) on the back of strong top-line growth and margin expansion. Shares of the food company jumped 8.6% to close at $37.27 on Friday.

Simply Good Foods reported adjusted fourth-quarter earnings of $0.29 per share, up 45% from the same quarter last year. Results outpaced the Street’s estimates of $0.25 per share.

Net sales rose 16.9% to $259.9 million and surpassed the consensus estimate of $255.42 million due to strong Atkins and Quest performance.

The company’s core North America sales increased 17.1% year-over-year, while international net sales rose 2.1%. Notably, the SimplyProtein brand divestiture and the European business exit acted as headwinds in the quarter.

Gross margin stood at 40.2%, up 60 basis points (bps) year-over-year. Markedly, supply chain inflation during the quarter was more than offset by net price realization and favorable product form and retail channel mix due to elevated shopper traffic in brick and mortar channels, the company said.

For Fiscal 2021, adjusted earnings were $1.26 per share, up 38.5% year-over-year. Net sales jumped 23.1% to $1.01 billion.

The CEO of Simply Good Foods, Joseph E. Scalzo, commented, “As we look to fiscal 2022, we are well positioned to build on our momentum and deliver solid net sales and earnings growth. In Atkins and Quest we have two strong brands with advertising, marketing and innovation plans in place to drive growth.” (See Simply Good Foods stock charts on TipRanks)

For Fiscal 2022, the company projects net sales to increase 8% to 10%, compared to the year-ago period. Additionally, modest gross margin contraction is expected as supply chain cost inflation is likely to be mostly offset by the price increase in September and cost savings initiatives.

Following the fourth-quarter results, Jefferies analyst Robert Dickerson reiterated a Hold rating on the stock with a price target of $40 (7.32% upside potential).

Another analyst, Stifel Nicolaus’ Christopher Growe upgraded the stock to Buy from Hold but maintained the price target of $42 (12.69% upside potential).

The rest of the Street is cautiously optimistic about the stock and has a Moderate Buy consensus rating based on 1 Buy and 1 Hold. The average Simply Good Foods price target of $41 implies 10% upside potential. Shares have increased 85.6% over the past year.

According to TipRanks’ Smart Score system, Simply Good Foods gets a 6 out of 10, which indicates that the stock is likely to perform in line with market averages.