Why Cott Corporation Stock Jumped 10%

By Markets Fool.com

What: Beverage company Cott Corporation's (NYSE: COT) stock jumped as much as 10.8% on Thursday, after the company announced second-quarter results and the acquisition of S&D Coffee and Tea. Shares closed the trading day up 9.97%.

Continue Reading Below

Image source: Cott.

So what: Cott reported revenue and adjusted EPS of $765 million and $0.15, respectively. These figures compare to Cott's $780 million in revenue and adjusted earnings per share of $0.18 in the year-ago quarter.

Analyst estimates were in line with results. On average, analysts expected Cott to report revenue of $766 million and adjusted EPS of $0.15.

One of the most positive takeaways from the quarter was Cott's higher gross profit margin. For the quarter, Cott's gross profit margin was 33% -- up from 30.9% in the year-ago quarter.

Cott management confirmed the company "entered into a definitive stock purchase agreement to acquire S&D Coffee," a premium coffee roaster and provider of customized coffee, tea, and extract solutions.

Continue Reading Below

"The acquisition of S&D is in line with Cott's strategy of focusing on acquiring cash accretive businesses with higher growth while continuing Cott's beverage diversification outside of carbonated soft drinks, shelf stable juices, and large format retail," the company said in a press release.

Now what: Looking forward, management believes its recent acquisitions can help the company generate between $395 to $435 million in operating cash flow in 2019. After backing out expected capital expenditures of $160 million to $170 million, Cott anticipates generating between $225 to $275 million in free cash flow in 2019.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Daniel Sparks has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.