Simply Good Foods Consumption Trends Looks Grim For Q2, Says Analyst

Stifel analyst Matthew E. Smith reiterated a Buy rating on the shares of Simply Good Foods Co SMPL and lowered the price target from $48 to $38.

The company is scheduled to report its second quarter result on Thursday, April 4.

The analyst has lowered FY24 revenue and EBITDA expectations based on weaker-than-anticipated consumption. The analyst estimates revenue growth to be 4.5% (previously 6%) and EBITDA of $258 million, down $6 million from the previous estimate.

The analyst has also lowered the second-quarter revenue growth estimate to 5% and EBITDA to $54.6 million.

The analyst said the current guidance range is achievable based on current trends, albeit at the lower end.

The analyst continues to expect EBITDA growth will outpace revenue growth with cost favorability more than offsetting increased investments.

Current consumption trends suggest Quest can achieve double-digit growth in FY24 and the Atkins brand is likely to decline mid-single digits, said the analyst.

The analyst noted benefits from rebuilding the innovation pipeline of Atkins will likely have minimal benefit in FY24.

The analyst noted the company could pursue acquisitions to further diversify its portfolio, bars currently represent approximately 50% of revenue and the Atkins brand overall accounts for 42% of measured channel sales. 

Evidence of Atkins stabilization, new product and channel expansion from Quest, and growth accretive M&A support further upside to the shares in the analyst's view.

Price Action: SMPL shares are trading higher by 0.38% at $34.02 on the last check Thursday.