Friday - Mizuho Securities has increased its price target on Utz Brands (NYSE:UTZ) shares to $24, up from the previous target of $22, while keeping a Buy rating on the stock. The adjustment follows Utz Brands' first-quarter earnings, which revealed a modest EBITDA beat. The earnings report highlighted a positive trend in productivity that is expected to contribute to higher than anticipated gross margins for the fiscal year 2024. This is seen as a sign of growing momentum for the company.
The analyst from Mizuho noted that the improved productivity provides Utz Brands with the flexibility to reinvest in initiatives that are likely to boost volume, supporting a forecast of continued EBITDA growth through the fiscal year 2025. The company's visibility into new distribution channels expected to begin mid-year, combined with more effective analytics and improving promotional return on investment, were cited as reasons for maintaining a positive outlook on the stock.
The report from Mizuho also mentioned that the emerging business model for Utz Brands is becoming more defined and is poised to deliver a double-digit percentage increase in profits. The analyst has kept the estimated EBITDA for the fiscal year 2024 unchanged at $201 million but has raised the forecast for the fiscal year 2025 to $230 million, up from the previous estimate of $226 million.
The new price target of $24 is based on a 2x price-to-earnings growth (PEG) ratio for the calendar years 2023 to 2025, which aligns with the growth rates of peers in the Staples sector. The firm's outlook suggests that concerns about revenue should be seen as an opportunity to buy, with an expectation of a positive risk/reward balance for investors in Utz Brands.
InvestingPro Insights
As we delve into the financial health and market performance of Utz Brands, InvestingPro data paints a detailed picture. The company's market capitalization stands at a robust $2.75 billion, reflecting investor confidence in its market position. Despite a challenging P/E ratio, currently at -47.46, analysts are forecasting a turnaround with net income expected to grow this year, aligning with Mizuho Securities' optimistic outlook.
The productivity and potential for reinvestment highlighted by Mizuho are underscored by Utz Brands' ability to maintain liquid assets that exceed short-term obligations, providing financial flexibility. The company's strategic initiatives, including expanding distribution channels and enhancing analytics, are likely to bolster this position. Moreover, the company has shown a strong return over the last month with a 12.8% price total return, which could entice investors looking for short-term gains.
For those seeking a deeper dive into Utz Brands' financial nuances, InvestingPro offers additional insights. There are 10 more InvestingPro Tips available, which could further inform investment decisions. Interested readers can explore these tips and take advantage of the additional insights at https://www.investing.com/pro/UTZ. To enrich your investment analysis experience, use the coupon code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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