September 6, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of snack maker Snyder's-Lance (Nasdaq: LNCE ) surged as much as 13% on news that the company is acquiring Snack Factory, the maker of Pretzel Crisps, for $340 million in cash.
So what: The acquisition is expected to boost Snyder's-Lance's earnings by $0.10 a share next year and bring in $160 million in additional revenue. Pretzel Chips, an exceptionally thin, flat cracker, is the latest addition to Snyder's-Lance's growing portfolio, which includes Cape Cod, Archway, and Stella D'oro, as well as other well-known brands.
Now what: The jump in share price seems a bit odd, considering the large payout for just a 10-cent bump in EPS. Future growth from Pretzel Chips will be have to be especially strong to make the deal pay off in the long run, and at a P/E of 26, Snyder's already looks pricy for the low-growth snack food market. Today's news doesn't make this stock look any more appetizing to me.
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