Shares of leading proactive wellness and ready-to-drink (RTD) protein shake specialist BellRing Brands (BRBR 14.76%) are down 17% as of 2 p.m. ET on Tuesday after the company reported mixed first-quarter earnings and announced that its Chief Executive Officer would be retiring. While BellRing Brands exceeded the low bar set by Wall Street analysts in Q1, the company's guidance and CEO departure left the market worried. Sales grew 1% in Q1, while adjusted EBITDA dropped from $125 million to $90 million year over year. Looking ahead, management expects sales to grow by roughly 5% in 2026 -- well below its long-term guidance (and historical precedent) of double-digit growth.
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BellRing Brands: A falling knife or a value investment?
BellRing Brands holds a leading position within the RTD protein shake niche, commanding a 22% market share. However, the company's 1% sales growth in Q1 fell well shy of the broader wellness and RTD industry's 7% during the quarter. CEO Darcy Horn Davenport explained that competition continues to be fierce in the wellness niche, stating,
As insurgent brands work to establish themselves in the market, we expected promotional spending would increase. However, as I briefly mentioned earlier, year to date, the number of events is tracking modestly ahead of our initial expectations.
While Davenport also noted that some of this spending was "less rational," as newcomers try to gain a foothold in the lucrative market, it is nonetheless a worrying indicator of how BellRing's moat may not be as wide as hoped. Time (the next few quarters to a year) will tell.
These worries, combined with Davenport's departure, formed a wall the market couldn't climb over today. Davenport helped triple the company's sales since becoming CEO in 2019, but leaves the company with an all-important successor search underway amid challenging times.
While BellRing Brands remains the leader in its niche and trades at an alluring 10 times free cash flow, I would want another quarter or two of market share updates before considering a purchase, especially as we wait for a new CEO.
