BellRing Brands (BRBR +1.08%) was flagged as an outlier of a stock on Thursday by a well-known researcher, but not in a good way. This development obscured what seemed to be an orderly transition to leadership announced by the protein products maker that morning. That trading session saw the company absorb a nearly 8% body blow to its share price.
Not a ringing endorsement
Zacks Investment Research named BellRing its bear of the day, ranking it a strong sell. The crux of the researcher's argument is that the company, maker of the Premier Protein shakes and similar products, hasn't effectively coped with mounting competition over time.
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Zacks senior equity strategist Bryan Hayes wrote in an accompanying analysis that "for years, BellRing rode a powerful tailwind as consumers embraced high-protein diets. But that very success has attracted a flood of competition, and the company now finds itself squarely on the wrong side of a margin squeeze."
He added that BellRing is struggling these days with a significant rise in input costs, at a time when ambitious competitors are being aggressive with promotional activities, necessitating higher marketing spend. On top of that, falling demand isn't doing the company any favors.
NYSE: BRBR
Key Data Points
A change at the top
I'd agree with that assessment, particularly in light of BellRing's second-quarter results published in May. Sales growth was anemic (up only 2% year over year), while the company's bottom-line erosion was a heavy cause for concern. I don't feel that heavy competition will abate much, if at all, and promotional and input costs should continue to produce headaches. This is a stock I'd avoid now.
In a more positive development, BellRing named a new CEO to replace the outgoing Darcy Davenport. Effective July 29, this is veteran consumer goods executive Michael Axelrod, who has led several companies in the sector, including, most recently, specialty food purveyor Snak King.
BellRing wrote that Axelrod's "record of strategic insight, strong customer relationships and operational excellence will be invaluable as we embark on the next chapter of growth."
