Farmer Brothers Company (FARM) AI Stock Analysis

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Farmer Brothers Company

(NASDAQ:FARM)

48Neutral

Farmer Brothers Company's overall stock score reflects significant financial performance challenges, with persistent net losses and negative cash flow. Technical indicators show a neutral to slightly bearish sentiment. The recent earnings call presented some positive developments, such as improved sales and gross margins, but also highlighted ongoing challenges, including declining volumes and increased expenses. Leadership changes and strategic partnerships offer some optimism for future growth.

Farmer Brothers Company (FARM) vs. S&P 500 (SPY)

Market Cap

$37.16M

Dividend YieldN/A

Average Volume (3M)239.27K

Price to Earnings (P/E)―

Beta (1Y)0.39

Revenue Growth-9.51%

EPS Growth83.29%

CountryUS

Employees1,003

SectorConsumer Defensive

Sector Strength94

IndustryPackaged Foods

Share Statistics

EPS (TTM)-0.47

Shares Outstanding21,353,940

10 Day Avg. Volume192,899

30 Day Avg. Volume239,271

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.14

Price to Cash Flow (P/CF)4.60

P/FCF Ratio22.40

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$6.00

Price Target Upside242.86% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

Farmer Brothers Company Business Overview & Revenue Model

Company DescriptionFarmer Brothers Company (FARM) is a leading coffee roaster, wholesaler, and distributor in the United States, serving a wide range of customers including restaurants, hotels, casinos, and retail outlets. Founded in 1912, the company offers a broad portfolio of products that include roasted coffee, tea, spices, and culinary products. Farmer Brothers is known for its commitment to sustainability and innovation in the food service industry, providing both traditional and specialty coffee blends, along with equipment and service solutions to meet the diverse needs of its clients.

How the Company Makes MoneyFarmer Brothers Company generates revenue primarily through the sale of its coffee and tea products, which are distributed through direct-store delivery, direct sales, and third-party distributors. The company's key revenue streams include the wholesale distribution of its branded and private-label coffee products to food service operators, such as restaurants and hotels, as well as to institutional buyers like offices and healthcare facilities. Additionally, Farmer Brothers offers a range of allied products, including spices, culinary ingredients, and coffee-related equipment, which contribute to its earnings. The company also leverages strategic partnerships and agreements with various suppliers to ensure a consistent supply of high-quality raw materials, which supports its product offerings and service excellence.

Farmer Brothers Company Financial Statement Overview

Summary

Farmer Brothers Company faces significant financial challenges across all key areas. The persistent net losses, high leverage, and negative cash flow trends suggest a need for strategic adjustments to improve financial health. While there are some efficiencies in gross profit, the overall financial stability is weak, requiring attention to revenue growth and cost management to stabilize operations.

Income Statement

Neutral

The income statement shows concerning trends with declining revenues and persistent net losses. The TTM (Trailing-Twelve-Months) gross profit margin is 41.52%, a slight improvement over the previous period, indicating some efficiency. However, the net profit margin is negative at -2.92%, and EBIT and EBITDA margins are also negative, reflecting ongoing profitability challenges. Revenue growth has been negative year-over-year, which is troubling in the context of a competitive industry.

Balance Sheet

Neutral

The balance sheet reveals a high debt-to-equity ratio of 0.90, indicating significant leverage. Stockholders' equity has decreased, reflecting financial strain. The equity ratio is 23.16%, showing limited funding from equity. Return on equity remains negative due to sustained losses. While there is concern about financial stability, the company has managed to maintain some liquidity, albeit at reduced levels.

Cash Flow

Negative

Cash flow analysis highlights volatility in cash generation. The TTM operating cash flow to net income ratio is -0.17, signaling inefficiencies in converting income into cash. Free cash flow remains negative, with a growth rate of -62.1%, indicating challenges in sustaining operations through cash generation. The negative free cash flow to net income ratio further underscores liquidity issues.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
344.84M	341.09M	339.96M	469.19M	397.85M	501.32M
	Gross Profit
143.18M	133.89M	114.61M	136.92M	100.92M	138.12M
	EBIT
-9.39M	-2.25M	-20.96M	-9.35M	-11.44M	-10.01M
	EBITDA
4.18M	15.56M	-3.94M	18.52M	16.27M	2.31M
	Net Income Common Stockholders
-10.07M	-3.88M	-79.18M	-15.66M	-41.65M	-37.09M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
58.83M	5.83M	5.24M	9.82M	10.26M	60.01M
	Total Assets
349.10M	185.21M	187.78M	350.07M	338.01M	392.70M
	Total Debt
34.31M	59.41M	48.68M	135.41M	115.09M	143.48M
	Net Debt
30.26M	53.58M	43.44M	125.59M	104.83M	83.47M
	Total Liabilities
156.97M	139.66M	149.67M	245.32M	233.05M	280.79M
	Stockholders Equity
192.13M	45.55M	38.11M	104.75M	104.96M	111.91M
Cash Flow		Free Cash Flow
-10.60M	-27.99M	-21.90M	-26.62M	-16.60M	-16.11M
	Operating Cash Flow
1.75M	-14.15M	-6.88M	-11.45M	-1.49M	1.46M
	Investing Cash Flow
-2.90M	14.72M	88.44M	-6.04M	-10.70M	21.92M
	Financing Cash Flow
-224.00K	10.00K	-86.14M	17.05M	-37.39M	29.66M

Farmer Brothers Company Technical Analysis

Technical Analysis Sentiment

Negative

Last Price1.75

Price Trends

50DMA

2.28

Negative

100DMA

2.08

Negative

200DMA

2.22

Negative

Market Momentum

MACD

-0.03

Positive

RSI

44.43

Neutral

STOCH

32.19

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FARM, the sentiment is Negative. The current price of 1.75 is below the 20-day moving average (MA) of 2.11, below the 50-day MA of 2.28, and below the 200-day MA of 2.22, indicating a bearish trend. The MACD of -0.03 indicates Positive momentum. The RSI at 44.43 is Neutral, neither overbought nor oversold. The STOCH value of 32.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FARM.

Farmer Brothers Company Risk Analysis

Farmer Brothers Company disclosed 38 risk factors in its most recent earnings report. Farmer Brothers Company reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Farmer Brothers Company Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
JVA	75 Outperform	$17.98M	6.05	11.70%	―	15.24%	―
POST	75 Outperform	$6.55B	19.44	10.01%	―	7.32%	34.44%
FIZZ	69 Neutral	$4.11B	22.30	40.81%	―	0.34%	9.48%
Sector *	63 Neutral	$20.53B	14.04	-16.01%	3.27%	1.30%	4.55%
SJM	61 Neutral	$12.17B	22.22	-3.55%	3.76%	7.07%	-181.54%
BGS	55 Neutral	$457.42M	―	-36.94%	13.15%	-6.30%	-258.92%
FARM	48 Neutral	$37.16M	―	-23.75%	―	-9.51%	83.29%

* Consumer Defensive Sector Average

Performance Comparison

FARM

Farmer Brothers Company

1.75

-1.60

-47.76%

BGS

B&G Foods

6.22

-3.42

-35.48%

JVA

Coffee Holding Co

3.20

1.65

106.45%

SJM

JM Smucker

115.94

10.47

9.93%

FIZZ

National Beverage

44.23

1.04

2.41%

POST

Post Holdings

116.93

16.98

16.99%

Farmer Brothers Company Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -2.78% | Next Earnings Date: May 8, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed picture with notable improvements in financial metrics and operational efficiencies. However, challenges persist with declining coffee volumes, increased operating expenses, and external pressures from volatile commodity markets.

Highlights

Increased Sales and Gross Margin

Sales increased by 6% compared to the first quarter of the year to $90 million. Gross margins maintained above 43%.

Positive Adjusted EBITDA and Free Cash Flow

The company realized its second straight quarter of positive adjusted EBITDA at $5.9 million and generated positive free cash flow for the first time in many years.

Operational Efficiency and SKU Rationalization

Completed comprehensive SKU rationalization and brand pyramid projects, expected to continue bringing operational efficiencies.

Strategic Partnership and Team Expansion

Formed a partnership with Urest for a new premium coffee program and added Brian Miller as Vice President of Sales to drive business development.

Lowlights

Decline in Coffee Volumes

Overall coffee volumes were down 8% year-over-year, primarily due to decreased customer counts and lower consumer spending.

Increased Operating Expenses

Operating expenses increased to $37.8 million or 42% of net sales, compared to $31.7 million or 35.4% in the same quarter last year.

Net Income Decrease

Net income for the quarter was $0.2 million compared to $2.7 million in the second quarter of fiscal 2024, influenced by a net loss of $1.5 million related to asset disposals.

Pressure from Commodity Markets

High prices and volatility in the coffee commodity markets are expected to put pressure on results over the coming quarters.

Company Guidance

During the Farmer Brothers fiscal second quarter 2025 earnings call, management highlighted several positive financial metrics and strategic initiatives. Net sales increased by 6% sequentially to $90 million, while gross margins remained above 43%, marking a 270 basis point improvement year-over-year. Adjusted EBITDA reached $5.9 million, up $3.6 million from the previous year. The company also achieved positive free cash flow for the first time in many years, amounting to $0.5 million. Despite an 8% decrease in overall coffee volumes, Farmer Brothers focused on its Allied products, which comprise about half of its total sales, to protect margins. The company proactively adjusted prices early in fiscal 2025 to navigate volatile commodity markets and remains vigilant about potential trade actions affecting key export markets. Additionally, leadership changes and strategic developments, such as a partnership with Urest and brand rationalization efforts, are expected to drive customer growth and operational efficiencies.

Farmer Brothers Company Corporate Events

Executive/Board ChangesBusiness Operations and Strategy

Farmer Brothers Announces Key Leadership Appointments

Positive

Jan 13, 2025

Farmer Brothers Co. has announced the appointment of Brian Miller as the new Vice President of Sales and the transition of Thomas E. Bauer to Vice President, Chief Field Operations Officer. Brian Miller, with over 25 years of experience in the consumer product industry and a strong track record in the coffee and beverage sector, is expected to drive top-line growth and enhance customer service at Farmer Brothers. These leadership changes are part of the company’s strategy to maintain sustainable long-term profitability and build on its recent positive momentum.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.