Why Shares of Boulder Brands, Inc. Took a Spill

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What: Shares of Boulder Brands, Inc.  (NASDAQ: BDBD  ) were getting tossed aside by investors today, falling as much as 22% after a disappointing first-quarter earnings report. 

So what: The maker of health foods including Smart Balance said sales grew 15.2% to $122.9 million in the quarter, though that was short of analyst estimates $124.8 million. The bottom line wasn't any better as its adjusted per-share profit fell from $0.07 to $0.05, missing expectations by a penny. CEO Stephen Hughes said higher egg white products cut into profits as did a shift in the sales mix to its Natural segment, which has lower gross margins. 

Now what: Hughes said the company was changing formulations to require fewer egg whites and making other changes that would return gross margins to historical norms by the second half of the year. Looking ahead, the company lowered the top end of its full-year guidance from $0.39-$0.44 to $0.39-$0.41. With analysts expecting a per-share profit of $0.43, the market was clearly disappointed by the reduced outlook, but I'd give management some time to improve gross margins. I'm also encouraged by strong sales growth in its Natural segment, which increase 39.5% in the quarter. With that segment now making up a majority of sales, revenue growth could actually accelerate going forward. 

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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8/27/2015 4:00 PM
BDBD $8.10 Up +0.08 +1.00%
Boulder Brands CAPS Rating: *