Earnings Updates
MGP Ingredients (MGPI) Moved to Sell after Quarterly Miss
MGP Ingredients delivered Q2 earnings this morning that missed expectations for the second quarter in a row. Revenue was up by 2.9% to $88.3 million (missed by $2.3 million) while EPS of $0.44 missed by $0.05. Sales in the Distillery Products segment were up 2.8% and gross profit was up 4.6%, while sales in the Ingredients Solutions segment were up 3.6% with gross profit declining.
Management attributed the miss to a pulling back among some whiskey customers who are reassessing their inventory and product needs. Understandably, they won’t go into details on specific customers but given that this is the second quarter in a row it’s starting to look more like a trend and it puts more pressure on MGP to deliver in the second half of the year. Management said it is maintaining its full-year guidance and is confident the back half of 2018 will indeed pan out as expected, but I’m not so sure.
One of the things that jumped out at me from the conference call was that MGP is reducing its minimum order size from 1000 barrels to 250 barrels, with the intent of attracting smaller craft distillers. If topline growth were good this might sound like good news. But with a slowdown, this sounds like MGP is just searching for more customers. And that’s not a great look.
Maybe I’m overthinking it, but with the stock breaking below its 200-day line, back to where it was at the end of 2017, and more questions than answers around the big picture trend (is MGP still going to be the supplier of choice for craft whiskey?), I don’t want to stick around and risk being on the wrong side of this one. Let’s take a modest loss and move on. SELL.
AxoGen (AXGN) Moved to Hold after Sales Execution Issues
AxoGen is also trading down today after the company missed sales expectations due to execution issues in certain territories with some of the 19 independent sales agencies that account for 20% of AxoGen’s revenue (the remaining 80% of sales coms from its own sales reps).
Revenue growth was still rapid at 35.7%, but it wasn’t the 40% management had us expecting. That said, management is sticking with its full-year guidance and believes that with additional training, support and, in some cases, further breaking down of territories, the company will be back on track to reach that magic 40% growth rate.
The stock has taken a hit today. But I’m not ready to throw in the towel. Management will be speaking at the Canaccord conference next week, and they’re sure to speak more on this topic. I’ll update you as I dig deeper. HOLD.
Apptio (APTI), MiX Telematics (MIX) and Chefs’ Warehouse (CHEF)
These three companies also reported either last night or this morning, and all three stocks are doing just fine. Apptio is trading up around 6%, MiX is basically flat, and Chefs’ is up around 8%. I’ll get into more details on their earnings reports in tomorrows update.