Yahoo Finance Vita Coco (NASDAQ:COCO) Posts Q2 Sales In Line With Estimates
Coconut water company The Vita Coco Company (NASDAQ:COCO) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 3.2% year on year to $144.1 million. On the other hand, the company's full-year revenue guidance of $505 million at the midpoint came in slightly below analysts' estimates. It made a GAAP profit of $0.32 per share, improving from its profit of $0.31 per share in the same quarter last year.
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Vita Coco (COCO) Q2 CY2024 Highlights:
Revenue: $144.1 million vs analyst estimates of $144.3 million (small miss)
EPS: $0.32 vs analyst estimates of $0.29 (10.3% beat)
The company reconfirmed its revenue guidance for the full year of $505 million at the midpoint
Gross Margin (GAAP): 40.8%, up from 36.6% in the same quarter last year
Free Cash Flow of $26.63 million is up from -$391,000 in the previous quarter
Sales Volumes rose 4% year on year (19% in the same quarter last year)
Market Capitalization: $1.40 billion
Martin Roper, the Company’s Chief Executive Officer, said, “We are pleased with this quarter’s results of 3% net sales growth and with our scan data growth, despite inventory challenges due to delays in product shipments caused by temporary headwinds in ocean freight availability and transit times. Our second quarter branded net sales were up, while private label was down slightly, as strong private label coconut water growth was partially offset by the previously communicated expected decrease in our private label coconut oil shipments. Net income of $19 million, and Adjusted EBITDA1 of $32 million, benefited from improved gross margins, driven primarily by lower transportation costs than last year. Based on a continuation of current trends, we are reaffirming our full year guidance, and we expect the flow of product should allow us to rebuild retail and distributor inventories to more normal levels by the end of the year, which we believe sets us up for a strong 2025. We remain focused on driving long term growth of the coconut water category and our brands.”
Founded in 2004 followed by a 2021 IPO, The Vita Coco Company (NASDAQ:COCO) offers coconut water products that are a natural way to quench thirst.
Beverages and Alcohol
These companies' performance is influenced by brand strength, marketing strategies, and shifts in consumer preferences. Changing consumption patterns are particularly relevant and can be seen in the explosion of alcoholic craft beer drinks or the steady decline of non-alcoholic sugary sodas. Companies that spend on innovation to meet consumers where they are with regards to trends can reap huge demand benefits while those who ignore trends can see stagnant volumes. Finally, with the advent of the social media, the cost of starting a brand from scratch is much lower, meaning that new entrants can chip away at the market shares of established players.
Sales Growth
Vita Coco is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale.
As you can see below, the company's annualized revenue growth rate of 14.4% over the last three years was solid for a consumer staples business.
This quarter, Vita Coco's revenue grew 3.2% year on year to $144.1 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 7.1% over the next 12 months, an acceleration from this quarter.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Vita Coco's average quarterly volume growth was a robust 7.6% over the last two years. This is good because meaningful volume growth is hard to come by in the stable consumer staples sector.
In Vita Coco's Q2 2024, sales volumes jumped 4% year on year. By the company's standards, this result was a meaningful deceleration from the 19% year-on-year increase it posted 12 months ago. We'll be watching Vita Coco closely to see if it can reaccelerate demand for its products.
Key Takeaways from Vita Coco's Q2 Results
We were impressed by how significantly Vita Coco blew past analysts' gross margin expectations this quarter. We were also glad its EPS outperformed Wall Street's estimates. On the other hand, its full-year revenue guidance was underwhelming. Overall, this quarter seemed fairly positive and shareholders should feel optimistic. The stock traded up 2% to $25.25 immediately following the results.
Vita Coco may have had a good quarter, but does that mean you should invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.