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Why Tupperware Brands Stock Rallied 14% at the Open Today

By Reuben Gregg Brewer - Jun 22, 2021 at 10:25AM

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Shares of the iconic plasticware maker jumped after it updated its capital allocation policy. Here's a quick look at what you need to know.

What happened

Shares of Tupperware Brands (TUP 1.41%) rose a quick 14% as trading got underway on June 22. The maker of plasticware made two announcements in one news release, sent after the close of trading on June 21, which were likely the cause of the big price advance.

So what

The first bit of news in yesterday's release was that Tupperware had paid down $58 million worth of a term loan. Chief Financial Officer Sandra Harris tied this decision directly to the company's ongoing turnaround efforts, which have improved Tupperware's liquidity position over the past 18 months. Harris described the move as accretive.

A person raising their arms in triumph in front of a computer.

Image source: Getty Images.

That's good, but more telling was the second item contained in the news release -- Tupperware is updating its capital allocation policy to include a $250 million stock buyback. Harris noted that the decision tied back to the company's "increased confidence" in its future cash flow generation capacity. Stock buybacks often arrive to great fanfare but don't always pan out. However, it seems as though Tupperware is getting a lot more confident about its future. Investors reacted positively, as you might expect.

Now what

Tupperware shares are up more than 370% over the past year. Although that period is obviously biased by the 2020 coronavirus-led bear market, the S&P 500 Index is up only around 36% or so over the same span. Clearly investors have priced in a lot of good news at Tupperware. Long-term investors should probably take a cautious approach here despite the good news.

Reuben Gregg Brewer 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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