On Tuesday, Citi maintained its optimistic stance on BellRing Brands (NYSE:BRBR), increasing its price target on the company's stock to $83 from the previous $72 while keeping a Buy rating. Despite the company's shares experiencing a 2% decline at the time of the announcement, Citi's analysis highlighted BellRing Brands' robust fourth-quarter sales and earnings, which surpassed expectations. Additionally, the firm's guidance for fiscal year 2025 is projected to be above consensus at the midpoint.
The recent dip in BellRing Brands' stock value comes after a significant three-month surge, where shares appreciated by 29% since the beginning of September. Citi acknowledges the possibility that the stock's performance could be leveling off after this substantial increase. Although the EBITDA margin outlook presented by BellRing Brands fell slightly short of expectations, Citi points out that the company's profit dollars are anticipated to grow more rapidly than previously predicted.
The primary factor contributing to BellRing Brands' profit growth is the increasing demand for its shake products. Citi notes that this demand is leading to more significant distribution gains, improved store placement, and quicker turnover on shelves. These factors are driving the sustained growth of the company.
Citi concludes that the continued growth trajectory of BellRing Brands supports the premium valuation of its stock. The firm's confidence in the company's performance and its prospects for continued demand for its products underpin the decision to maintain a Buy rating on the shares.
In other recent news, BellRing Brands has been the focus of several analyst adjustments following their fourth-quarter fiscal year 2024 earnings release. The company surpassed revenue expectations, posting $555.8 million, and reported an Adjusted EBITDA of $116.5 million, both higher than anticipated. The company's performance was notably driven by strong consumer demand, particularly for its Premier shakes, which have seen a resurgence in club stores.
Analysts from Stephens, Truist Securities, and Citi have all provided their insights on the company's recent performance and future prospects. Stephens reaffirmed its Equal Weight rating, while Truist Securities adjusted their price target to $60 and maintained a Hold rating. Citi, on the other hand, raised its target to $72, keeping a Buy rating.
BellRing Brands experienced growth in the ready-to-drink shake segment, primarily through volume increases attributed to organic growth and distribution gains. The company's Premier Protein powders also experienced significant consumption growth, up 43% in the fourth quarter, achieving record household penetration. Furthermore, the company purchased 1.3 million shares for $74 million and retains a $216 million share repurchase authorization.
Looking forward to fiscal year 2025, BellRing Brands anticipates robust sales growth, with indications suggesting a 10-12% increase. However, the company has also expressed caution about the potential impact of inflation and increased marketing expenses. Analysts from Citi maintain a Buy rating for BellRing Brands, driven by the company's sales growth outlook, expected to be at the higher end of its long-term algorithm of 10-12% by 2025.
InvestingPro Insights
BellRing Brands' (NYSE:BRBR) recent performance aligns with several key metrics and insights from InvestingPro. The company's stock has shown remarkable strength, with a 61.82% price total return over the past year and a 32.75% return in the last three months, corroborating Citi's observations about the stock's recent surge.
InvestingPro Tips highlight that BRBR is trading near its 52-week high, which supports Citi's analysis of the stock's strong performance. Additionally, analysts anticipate sales growth in the current year, aligning with Citi's positive outlook on the company's future earnings and distribution gains.
The company's financial health appears robust, with InvestingPro Data showing a 21.58% revenue growth in the last twelve months as of Q3 2024, and an impressive EBITDA growth of 36.17% over the same period. These figures underscore BellRing Brands' strong market position and growing demand for its products, particularly its shake line.
While the stock's P/E ratio of 42.86 suggests a premium valuation, it's worth noting that BRBR is trading at a low P/E ratio relative to its near-term earnings growth, according to another InvestingPro Tip. This could indicate that despite the recent price appreciation, there might still be room for growth, supporting Citi's increased price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for BRBR, providing a deeper understanding of the company's financial position and market performance.
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