Why Did Snyder’s-Lance Miss the Earnings Estimates for 3Q15?

Can the Diamond Foods Acquisition Expand Snyder’s-Lance's Reach?

(Continued from Prior Part)

Snyder’s-Lance’s 3Q15 results

Snyder’s-Lance, (LNCE) announced its definitive agreement to acquire Diamond Foods (DMND) along with its 3Q15 earnings release on October 28, 2015. The quarter ended on October 3, 2015. The company reported adjusted EPS (earnings per share) of $0.26, 13% up year-over-year. Snyder’s-Lance’s EPS fell below the consensus Wall Street analyst earnings estimate of $0.34, as the revenue softened.

A closer look

The company couldn’t meet the Wall Street consensus estimate for revenue. Revenue grew 1.8% year-over-year to $416.8 million, but below the Wall Street consensus estimate of $435.3 million. According to Snyder’s-Lance’s CEO Carl Lee, factors that impacted revenue included:

• retailer consolidations

• a softer back-to-school selling season

• major challenges in its mass merchandiser channel

In 3Q15, the company generated a one-time litigation settlement cost of $2.9 million. The company declared a quarterly dividend of $0.16 per share.

Peer group comparison

Hershey (HSY) is one of Snyder’s-Lance’s peers in the food industry (XLP). Hershey’s 3Q15 earnings fell by 31%, narrowing its revenue outlook for fiscal 2015 amid weakness in Chinese and US markets. In comparison, Mondelez International (MDLZ) reported 3Q15 adjusted EPS of $0.42 on revenue of $6.9 billion. This beat the consensus Wall Street analyst estimates for EPS and revenue of $0.41 and $6.8 billion, respectively.

Margins and cash flow

In its “Drive for 10” initiative, Snyder’s-Lance has been focusing on improving its operating margin to reach 10% level. In 3Q15, the company reported operating margin growth of 20 basis points reaching 7%. Adjusted free cash flow was $91.2 million.

Future outlook for Snyder’s-Lance

Snyder’s-Lance expects fiscal 2015 revenue to be ~$1.7 billion. It also expects diluted EPS to be in the range of $1.07–$1.12. It projects capital expenditure to be between $56 million–$58 million.

For fiscal 2016, the company expects revenue to grow by 3%–5%, and its diluted EPS to be $1.35–$1.42. It estimates capital expenditure to be between $50 million–$55 million.

Please note that the outlook above doesn’t include the impact of the Diamond Foods acquisition.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Snyder’s-Lance to Acquire Diamond Foods for ~$1.9 Billion

• Part 2 - Snyder’s-Lance Set to Gain Access to International Markets

• Part 3 - Diamond Foods to Improve Snyder’s-Lance Presence in Healthier Snacks