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Earnings Surprise Helps Tupperware Stock Continue Incredible Run

By Jon Quast – Updated Jul 29, 2020 at 10:58AM

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The company earned a massive profit in the second quarter.

What happened

Shares of Tupperware Brands (TUP -3.36%) are skyrocketing -- not just today but also in 2020 in general. The stock bottomed out in early April under $2 per share. Since then, it's about a ten-bagger. 

Today, the share price is spiking after results for the second quarter of 2020 surprised Wall Street. As of 11 a.m. EDT, Tupperware stock is trading 56% higher. But was up as much as 70% today.

TUP Chart

TUP data by YCharts.

So what

Tupperware sales were down 16% in Q2. And for the first half of 2020, sales have fallen 20%. Nevertheless, the company has a new management team and a turnaround plan. By cutting costs, tackling debt, and getting rid of certain business elements, Tupperware was able to boost its profit in Q2. A lot.

Tupperware reported $63.8 million in quarterly net income, which translates to $1.30 in earnings per share (EPS). Analysts expected a net EPS loss.

The net profit for Tupperware is important. The company's current liabilities (including current portion of long-term debt) are $1.2 billion. The heavy load is partly why the company was left for dead earlier this year, as investors questioned its long-term viability. However, it was able to retire $100 million of debt during Q2, improving its prospects.

A surprised man puts his hand on his head while staring at his computer screen.

Image source: Getty Images.

Now what

Tupperware might look like a value stock to some, but its business still has a long hill to climb. Over the last 12 months, it has generated negative EPS, even after the quarterly beat. Stable profits and revenue are some of the characteristics that make a great value buy, and Tupperware hasn't demonstrated those lately. One quarter doesn't make a trend.

Going forward, Tupperware is faced with the challenge of its business model -- products are sold by independent salespeople hosting events. Management appears to be sticking with this, even as we see many businesses pursue direct-to-consumer models. 

By contrast, Tupperware is pursuing a tiered-product model, offering similar products at different price points. Time will tell if that's the correct strategy.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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