Beyond Meat (BYND 0.16%), the leading maker of plant-based meat substitutes, reported strong second-quarter 2020 results after the market close on Tuesday.
Shares of the widely followed stock, which went public in May 2019, are down 7.6% at 6:10 p.m. EDT in after-hours trading on Tuesday. We can likely attribute the stock's fall largely to earnings that "only" met the Wall Street consensus estimate. This is a highly valued stock, so investor expectations are super elevated.
Moreover, investor optimism was probably dampened somewhat by management's comment on the earnings call that it expects the remainder of the year to remain challenging because of the recent resurgence in COVID-19 cases across some areas of the United States.
Image source: Beyond Meat.
Beyond Meat's key numbers
|
Metric |
Q2 2020 |
Q2 2019 |
Change |
|---|---|---|---|
|
Revenue |
$113.3 million | $67.3 million | 69% |
|
Operating income |
($8.2 million) | $2.2 million | N/A. (Result flipped to negative from positive.) |
|
Net income |
($10.2 million) | ($9.4 million) | N/A. (Loss widened 9%.) |
|
Adjusted net income |
($1.2 million) | ($2.3 million) | N/A. (Loss narrowed 48%.) |
|
Earnings per share (EPS) |
($0.16) | ($0.24) | N/A. (Loss narrowed 33%.) |
| Adjusted EPS | ($0.02) | ($0.05) | N/A. (Loss narrowed 60%.) |
Data source: Beyond Meat.
The quarter's revenue growth was due to an increase in volume sold, partly offset by lower net price per pound "driven by promotional activity intended to encourage greater consumer trial," the company said in the earnings release.
Adjusted net loss and EPS exclude expenses attributable to the COVID-19 pandemic and early debt extinguishment.
Wall Street was looking for an adjusted loss per share of $0.02 on revenue of $99.8 million, so Beyond Meat easily surpassed the top-line expectation and hit the bottom-line estimate on the bull's-eye.
For context, in the first quarter, revenue soared 141% year over year to $97.1 million, crushing Wall Street's $87.3 million consensus estimate. Earnings per share were $0.03, versus a net loss per share of $0.95 in the year-ago period. That profit came as a pleasant surprise to many investors, as analysts had been modeling for a loss per share of $0.06.
Channel and geographic performance
| Geographic Distribution Channel | Q2 2020 Revenue | Change (YOY) |
|---|---|---|
| U.S. retail | $90.0 million | 195% |
| U.S. food service | $6.5 million | (61%) |
| U.S. total | $96.5 million | 105% |
| International retail | $9.6 million | 167% |
| International food service | $7.2 million | (57%) |
| International total | $16.8 million | (17%) |
| Total revenue | $113.3 million | 69% |
Data source: Beyond Meat. YOY = year over year.
As widely expected, Beyond Meat's food-service sales were significantly hurt by the pandemic, which has caused the closure of many indoor dining areas in restaurants and other food-service operations. Retail sales continue to get a tailwind from the crisis, driven by the increased numbers of consumers eating at home.
The pandemic affected the entire quarter, whereas it affected only the last month (March) of the first quarter. So it's not surprising that year-over-year revenue growth accelerated relative to the first quarter in the U.S. retail channel, the company's largest distribution category. In the first quarter, U.S. retail revenue jumped 157% year over year. Likewise, it's not surprising that year-over-year food-service results (in both the U.S. and internationally) deteriorated sequentially. In the first quarter, food service in both geographic categories grew year over year.
What management had to say
Here's the core part of what CEO Ethan Brown had to say in the earnings release:
I am proud of our record net revenues and growth during a very challenging period. As the toll of the COVID-19 pandemic took hold across the foodservice industry, we repurposed assets and repacked and rerouted products to meet increased consumer activity in the retail aisles. Throughout the quarter, our brand experienced an enviable combination of consumer trends -- increasing household penetration, increasing buying levels per household, and strong repeat purchase rates of nearly 50%, well above the success threshold for consumer packaged goods.
Further, we forged ahead with our long-term growth strategy. We invested in expanded operations and sales in the EU [European Union] and Asia, in innovation, and in targeted pricing measures during this period of high beef prices.
2020 guidance remains suspended
Last quarter, management pulled its 2020 guidance in light of the uncertainty surrounding the pandemic. It did not reissue a full-year outlook for the same reason.
In short, the company turned in a strong quarter and management remains upbeat about its long-term growth prospects. Granted, the stock pulled back on Tuesday during the after-hours trading session. However, that's probably because investor expectations were unrealistically high given the current macroeconomic environment.
