Please ensure Javascript is enabled for purposes of website accessibility

Beyond Meat Stock Is Flying Higher Today After Earnings Release

By Jon Quast – Updated May 6, 2020 at 12:28PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The plant-based meat operation is getting more profitable with scale.

What happened

Shares of Beyond Meat (BYND 8.01%) were headed much higher on Wednesday after the company reported earnings for the first quarter of 2020. As of 11:30 a.m. EDT, the stock was trading a full 19% higher.

The headline takeaway from Q1 is that Beyond Meat turned a profit, despite all the challenges facing the food industry because of the COVID-19 pandemic.

A hamburger made from Beyond Meat's Beyond Burger product.

Image source: Beyond Meat.

So what

Prior to the Q1 earnings release, Beyond Meat's stock had already rebounded 85% from March lows. Despite this rally, investor sentiment was still tepid going into earnings. After all, 51% of Beyond Meat's 2019 revenue came from restaurants and food service, and restaurant sales have plummeted due to the coronavirus. It was logical to expect Beyond Meat to take a hit as a result.

Beyond Meat CEO Ethan Brown referenced the coronavirus in the Q1 earnings call and said, "[I]t is having and will continue to have a negative impact in the short term." That said, the Q1 results were encouraging. Quarterly food-service sales were up 100% year over year, while retail sales were up 185%. Management noted that food-service sales fell in late March but a lot of consumer demand shifted toward grocery retail outlets.

While the top-line growth is good, investors are likely cheering the bottom-line surprise today. Beyond Meat's net income was $1.3 million according to generally accepted accounting principles (GAAP), which translated to earnings of $0.03 per share. This profitability resulted from factors like higher sales volume, production improvements, and lowered cost of packaging.

A businessman draws an upward arrow on a transparent screen.

Image source: Getty Images.

Now what

Taken in isolation, Beyond Meat stock's pop today looks overdone. The company didn't previously give first-quarter guidance, but for full-year 2020, it guided for net revenue of $500 million at the midpoint, good for 67% growth. Its Q1 revenue of $97.1 million looks on pace for that, although Beyond Meat has now withdrawn 2020 guidance because of COVID-19. In other words, investors should have expected this kind of revenue.

However, broadening the lens, it's easier to understand the reaction of investors to Beyond Meat's results. Previous 2020 guidance called for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of about 8.5% of revenue -- in line with 2019 results. But the bulk of the adjusted EBITDA was expected in late 2020. In Q1, Beyond Meat delivered adjusted EBITDA of $12.7 million. That was 13% of revenue and well ahead of schedule.

Simply put, Beyond Meat is proving to be more profitable with scale, and that's reason for optimism as the business continues to scale up at an impressive pace.

Jon Quast owns shares of Beyond Meat, Inc. The Motley Fool recommends Beyond Meat, Inc. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Beyond Meat Stock Quote
Beyond Meat
$15.91 (8.01%) $1.18

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.