Lifeway Foods is a supplier of the probiotic fermented beverage known as kefir. It has drinkable kefir in smoothies, including the yummy blueberry smoothie, frozen kefir, specialty cheeses and a ProBugs line for kids.
Headquartered in Illinois, its products are available in the United States but it is slowly growing its business in Canada, Latin America and the United Kingdom.
Probiotics are commonly called “healthy bacteria” by the rest of us and it’s supposed to be good for your gut.
Big Earnings Beat in the Second Quarter
On Aug 17, Lifeway reported second quarter results and blew by the Zacks Consensus Estimate by 9 cents. Earnings were $0.13 versus the consensus estimate of $0.04.
Sales rose 4.4% to $31.1 million from $29.8 million in the year ago quarter on higher sales of its kefir products.
Margin expansion was boosted from lower milk prices and manufacturing efficiencies, including lower packaging costs, improved labor productivity and improved manufactured costs related to increased production at the Waukesha facility.
It saw its highest second profitability in company history.
Lifeway has cash and cash equivalents of $6 million as of June 30, 2016. That’s up from $5.6 million at the end of 2015.
It has been spending some of that cash repurchasing shares. In the six months ending June 30, 2016, it repurchased about 69,000 shares at the cost of $738,000.
Lifeway has 1.2 million shares remaining on its repurchase plan. There’s no expiration date for the plan and the company is under no obligation to continue it. It can be suspended or discontinued at any time.
Restatement of the First Quarter Completed
There was the messy business of needing to restate its first quarter numbers. This hampered the stock earlier in the year.
Lifeway is a small cap company with a market cap of just $232 million. With probiotics now becoming more of a mainstream food item, it will likely experience some growing pains as momentum picks up.
The good news for investors is that the restatement entailed actually increasing most of the reported numbers, including earnings which went up $0.02.
The analysts are feeling better about what they are hearing.
2 estimates have been raised for 2016 and 2017 since the earnings report.
The 2016 Zacks Consensus Estimate jumped up to $0.38 from $0.20 in the last 30 days. That’s earnings growth of 216% as the company only made $0.12 in 2015.
The growth is expected to continue in 2017 as the Zacks Consensus Estimate rose to $0.44 from $0.35. That’s another 17% earnings growth.
Shares Have Soared
Shares are up 36% since the second quarter earnings report.
They’re no longer cheap either. Lifeway trades with a forward P/E of 38.
But the niche food market is proving to have sustainability as Americans look to be healthier so the analysts are banking on big growth.
For investors looking for a way to play the probiotics, Lifeway is definitely a stock to keep on your short list.
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