Earnings Roundup
It was a big week for earnings in our portfolio. Here’s what we learned.
Primo Brands (PRMB) delivered Q1 results that slightly missed expectations on revenue ($1.61 billion, +3%), beat on adjusted EBITDA ($342 million vs. $324 million consensus) and beat on adjusted EPS ($0.29 vs. $0.22 consensus). For the full year, management issued revenue growth guidance (typically conservative) of +3% to +5% that was above 2.8% consensus, and adjusted EBITDA guidance essentially matched consensus of $1.61 billion.
That would have all been relatively good news for the stock but then management also announced a non-dilutive equity offering of 47.5 million shares by One Rock Capital Partners. That’s a big chunk, worth roughly $1.53 billion at the current share price. That’s more than 1/10th the company’s market cap. The offering is being led by Bank of America (BAC) and Morgan Stanley (MS) and is likely why we’ve seen a jump in trading volume and a little pressure on shares.
I’m not expecting a big run in the stock in the near term, but think the relative stability of shares with such a large offering illustrates significant demand that will keep the stock acting well throughout the rest of the year. BUY
LandBridge (LB) shares traded down yesterday after Q1 results beat on revenue (+131% to $44 million) but missed on adjusted EBITDA ($38.8 million vs. $40.9 million consensus). But management reaffirmed the full-year adjusted EBITDA outlook ($170 - $190 million). There’s been some talk about oil production “turning over” in the Permian basin, where LB is focused. On that subject, the company said it’s relatively insulated to commodity pricing since it generates 90% of revenue from non-oil and gas royalties. It sees demand for water handling infrastructure remaining very strong. LB stock has been up and down since we jumped on board in February. The relative stability has been a bonus when the broad market has gone kind of crazy, though admittedly, LB hasn’t performed as well as I’d hoped. Despite management’s comments about being insulated from energy prices, I think the stock may continue to be held back since there’s not a lot of incentive to buy when, generally speaking, energy stocks aren’t performing. Not going to exit the position today but will move to hold. HOLD
Dutch Bros (BROS) stock was up nearly 9% yesterday as virtually all Q1 metrics came in above expectations. Analysts are generally positive on the name for the same reasons I am, namely that there is momentum in the brand, store count is growing and has a lot of room to keep growing (including into the Northeast), customer-focused initiatives (like rewards, mobile order and pay) are moving the needle and a simple food menu is being tested and can add 10% or more to revenue (hopefully at a good profit) before long. Bottom line, we’re standing by BROS. BUY
Apple (AAPL) sold off in the four days after it reported but has firmed up this week. There is a lot of noise in the name given the tariff uncertainty with China, and shares are still trading well below their Liberation Day level. This is one of those situations where I think there’s a good deal of bad news priced into the stock (there can always be more, however), and we’re likely to get some sort of update on China tariffs over the weekend. It’s been a losing trade to bet against AAPL over the long term, and especially when shares are beat-up. Sticking with it. BUY
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