Freshpet Inc. (FRPT) is a pet food company that manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats in the United States and Canada. Freshpet provides meat-based recipes, such as chicken, beef, lamb and salmon; fruits and vegetables like carrots, peas and leafy green vegetables; and high-fiber grains, such as brown rice, oats and barley. It sells its products under the Freshpet, Dognation, and Dog Joy brand names, and is headquartered in Secaucus, New Jersey.

Q4 Earnings Recap

Back in early March, Freshpet released fourth-quarter earnings results that were actually better-than-expected.

Revenue of $115.9 million matched the analyst consensus and rose 37.1% year-over-year.

Adjusted gross margin, however, sharply decreased to 41.7% from 45.8%, weighed down by wage increases, cost inflation, and increased capacity investments.

Selling, general, and administrative costs popped by 46%, and because of this, adjusted EBITDA dipped from $12.9 million to $9.7 million for the period. Freshpet also reported a GAAP loss of $0.21 per share compared to estimates of a loss of $0.16 per share.

What really caught investors’ eyes was Freshpet’s bullish guidance.

The company now expects full-year revenue of at least $575 million, which would represent growth in the range of 33.5% and 35%. Freshpet also guided adjusted EBITDA to be greater than $55 million.

Bottom Line

FRPT is currently a Zacks Rank #5 (Strong Sell).

Eight analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen 33 cents to a loss of $0.46 per share. However, Freshpet’s earnings are expected to increase in 2022, up about 33% year-over-year, and it looks like bottom-line growth will continue next fiscal year as well.

Shares are up roughly 13% year-to-date compared to the S&P 500’s loss of 4% thanks to a post-earnings rally.

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Despite some hiccups in Q4, Freshpet’s management is confident in the company’s progress so far in 2022. “Over the past two years, we have invested in significant new capacity and the talent to support it. We plan to use that capacity wisely -- budgeting conservatively to ensure the reliability of our operations in an uncertain environment but also planning aggressively to maximize our growth potential,” said CEO Billy Cyr.

In addition to a lower earnings consensus estimate, FRPT is still expensive (even after its big pullback over the last year). The company is still unprofitable and trades at a price-to-sales ratio of 11X, which is expensive for a consumer staples stock.

While Freshpet is experiencing some notable tailwinds at the moment, shares may continue to experience some ups and downs as inflation hits business and the supply chain crisis lingers, so potential investors should proceed with caution.