On Friday, a CFRA analyst upgraded shares of National Beverage (NASDAQ:FIZZ) from Sell to Hold and increased the price target to $45 from $40. The adjustment reflects a revised earnings per share (EPS) forecast and the potential for a special dividend declaration by the company.
The analyst revised the 12-month price target based on a fiscal year 2025 (ending in April) price-to-earnings (P/E) ratio of 23.7 times. This valuation represents a discount to the company's five-year mean forward P/E of 25.1 times, considering expected slow growth. The EPS estimates were raised to $1.85 from $1.75 for fiscal year 2024 and to $1.90 from $1.80 for fiscal year 2025.
National Beverage recently reported earnings for the January quarter, with an EPS of $0.42 compared to $0.37 in the previous year, slightly exceeding the consensus by one cent. However, net sales showed a marginal increase of 0.6% to $270.1 million, falling short of consensus by $3.8 million. The gross margin expanded by 50 basis points to 35.9%, which was 100 basis points below the consensus.
The report indicated that the company's average sales price increased by 0.9%, but case volume saw a slight decrease of 0.7%. The better-than-expected bottom line was attributed to a lower tax rate, even as revenue and gross margin did not meet expectations. Following the earnings report, National Beverage's shares experienced a decline of approximately 4%.
The analyst suggests that the upgrade to Hold is based on the likelihood of National Beverage announcing a special dividend, a practice it has periodically undertaken in recent years, after examining its balance sheet. The firm notes that while it is challenging to pinpoint fundamental catalysts for the stock, the current valuation seems fair.
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