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Why Amplify Snack Brands Inc. Stock Plunged Today

By Steve Symington – Nov 15, 2016 at 7:46AM

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The better-for-you snack specialist fell short on the bottom line this quarter. Here's why.

Image source: Amplify Snack Brands.

What happened

Shares of Amplify Snack Brands Inc. (BETR) were down 24.6% as of 12:30 p.m. EST Tuesday after the healthy snack food products company released weaker-than-expected third-quarter 2016 earnings.

So what

Quarterly revenue climbed 48.1% year over year, to $68 million, driven by a combination of growth from Amplify's SkinnyPop brand, additional distribution of its Paqui brand, and its newer Oatmega brand. Amplify's recently closed acquisition of the Tyrrells international brand portfolio contributed $8.6 million in sales during the quarter.

On the bottom line, based on generally accepted accounting principles (GAAP), that translated to net income of $1.6 million, or $0.02 per diluted share. On an adjusted basis, which adds perspective by excluding things like stock-based compensation and acquisition costs, Amplify Snack Brands' net income was $9.0 million, or $0.12 per diluted share, flat from last year's third quarter. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was $20.1 million.

By comparison, analysts' consensus estimates called for lower revenue of $65.2 million, but higher adjusted earnings of $0.15 per share.

Now what

Amplify Snack Brands also revised its full-year guidance, and now expects 2016 revenue of $268 million to $272 million (up from its prior range of $260 million to $270 million), and adjusted EBITDA of $84 million to $86 million (down from its prior range of $92 million to $96 million).

During the subsequent conference call, Amplify CFO Brian Goldberg explained that this top-line guidance incorporates a faster-than-expected closing of the Tyrrells acquisition, which added a partial-month period of performance from the new brand, as well as its year-to-date performance and expectations for the remainder of 2016. As for the adjusted EBITDA guidance reduction, Goldberg pointed largely to lower-than-expected volume levels related to missing retailer reset windows for innovation and other products in the second half of this year, which meant deferring new distribution into early 2017. To a lesser extent, unfavorable brand, product, and customer mix negatively affected margins.

To be fair, these items can all be corrected going forward, so Amplify Snack Brands should hardly be considered a broken business as today's drop seems to imply. But given its earnings shortfall and with shares still trading at a lofty 33 times trailing-12-month earnings even after the decline, it's hard to blame investors for taking a step back.

Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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