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Why BellRing Brands Stock Fell as Much as 17% in the First Hour Today

By Reuben Brewer – Nov 19, 2021 at 11:50AM

Key Points

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The company reported earnings, with solid sales gains. But that wasn't enough to counter Wall Street's supply chain obsession.

What happened

Shares of nutrition supplement maker BellRing Brands (BRBR) fell sharply at the open on Friday, dropping as much as 17% in the first hour of trading. By roughly 10:30 a.m. ET, the stock had pared that loss to around 11%. The main reason for the decline was the food maker's fiscal fourth-quarter 2021 earnings release, which hit the Street after the close on Thursday.

So what

On the top line, BellRing posted fourth-quarter sales of $340 million, up a hefty 20.3% from the fiscal fourth quarter of 2020. Management highlighted an 18.2% sales advance for its Premier Protein brand, on a volume increase of 13.6%, and an 18.5% sales bump for the ready-to-drink version of the product, with a volume gain of 13.6%.

Distribution gains in a hot product category were key tailwinds, with pricing actions to help offset the impacts of inflation also showing up as a net benefit. The company's Dymatize brand had an even better showing, with sales up 41.3% year over year on a 32.4% volume gain, but a key contributor here was the reopening of gyms and other specialty stores that were shuttered in 2020 to help slow the spread of the coronavirus. Sales of the company's other products rose 7.6%. 

Two people in a gym drinking protein shakes.

Image source: Getty Images.

So far, the story sounds pretty good, but it goes downhill from here. For starters, Wall Street analysts had been expecting better sales results. Meanwhile, adjusted earnings came in at $0.25 per share, which was flat compared to the same quarter in fiscal 2020 and, like sales, came in short of the analyst call. These facts likely put investors in a dour mood.

But, in addition to this, BellRing touched a nerve with investors when it noted: "Overall net sales growth was impacted by supply chain disruptions across BellRing's contract manufacturer network. This resulted in lower than anticipated production, which exacerbated already low inventories and caused missed sales." That doesn't bode well for the immediate future, even though the company provided fiscal 2022 sales guidance that called for growth in the high single digits in the first half of the fiscal year ramping up to the mid teens in the second half.

Now what

BellRing is still growing despite the supply chain headwinds it is facing, which is impressive to some degree. But just the mere mention of supply chain troubles, especially when a company states that the issue is leading to "low inventories and missed sales," is enough to put investors in a selling mood. Wall Street can be mercurial, and BellRing's stock price today is evidence of that.

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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