What happened

Utz Brands (UTZ -0.72%) shareholders lost ground to the market Thursday morning -- the stock had slumped by 5% as of noon ET compared to a 0.6% decline in the S&P 500. The snack food specialist was still narrowly outpacing the wider market for 2023, though, with a 9% gain year to date.

Thursday's decline was sparked by an earnings update that failed to meet Wall Street's high expectations.

So what

In a premarket earnings announcement, Utz Brands revealed solid demand trends through March. Organic revenue rose by 4%, on top of a 21% spike in the prior-year period. And its gross profit margin held roughly steady at 30% of sales. "Our business momentum continued," CEO Howard Friedman said in the earnings press release.

Yet the news wasn't all good. Utz's growth rate trailed that of peers like PepsiCo, which recently reported 14% organic sales growth for Q1. Utz's sales volumes were also pressured by its increased prices, and fell by 6% in the quarter.  

Now what

The good news for investors is that the company's price hikes boosted its profit margin. In light of that, management boosted the lower end of its full-year earnings guidance range -- it now expects non-GAAP earnings to rise by between 7% and 10%. The previous forecast was for growth in the 6% to 10% range.

Utz Brands also forecast organic sales growth of between 4% and 6% this year, in line with its previous forecast. Investors might have been hoping for a modest upgrade to this prediction, especially as PepsiCo just raised its organic sales growth outlook from 6% to 8%.

Utz Brands executives said in the shareholder presentation that the company's core brands are winning market share in the salty snacks category. Yet sluggish results from some other brands appear to be dragging on overall sales growth. The modest increase to the earnings outlook wasn't enough to offset that demand weakness for most investors, and so the stock price dipped Thursday.