SkinnyPop Stock Meets Children of the Corn

By Markets Fool.com

Image source: Amplify Snack Brands.

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The company behind SkinnyPop popcorn and Paqui ground-corn tortilla chips is realizing that it's easier to work with stalks of corn than with a market of stocks. Shares ofAmplify Snack Brands(NYSE: BETR)hit fresh lows on Tuesday, plummeting 24% after posting disappointing quarterly results. Analyst downgrades and some ill-advised stock moves only made things worse.

Net sales soared 48%, to $68 million, for the third quarter, but it's not all organic growth. SkinnyPop and Paqui continued to gain shelf space, but there are also a couple of acquired product lines -- Oatmega protein bars and the Tyrrells international portfolio of salty snacks -- that padded the top-line results. Adjusted earnings remained essentially flat, at $0.12 a share, as an uptick in discounting, product mix shift, and a delay in planned cost savings ate away at Amplify's gross margin.

Analysts were holding out for a profit of $0.15 a share. They were also willing to settle for just $65.2 million in revenue, but it's not clear how much of the recent acquisitions were baked into the top-line consensus forecast. Tyrrells, for example, didn't close until early September, but those four weeks were enough to boost revenue by a hearty $8.6 million. In short, it may not be fair to dismiss this as a mixed quarter.

Then we get to Amplify's updated outlook, which is not very encouraging. Amplify Snack Brands is now eyeing $268 million to $272 million in revenue for all of 2016. It was targeting just $260 million to $270 million three months ago, but that was under the assumption that the Tyrrells purchase wouldn't close until the end of September. It closed early, so one would have to add the $8.6 million in September sales from Tyrrells to the earlier guidance, pushing that guidance up to between $268.6 million and $278.6 million.

The forecast for adjusted EBITDA, whichstood at $92 million to $96 million, is now $84 million to $86 million.Amplify Snack Brands didn't issue earnings guidance over the summer, but the $0.49 to $0.51 a share that it's now projecting is woefully short of the $0.61 a share that analysts were expecting.

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Kernels of wisdom

Adding insult to injury, Amplify Snack Brands' float is about to pop. It filed a shelf registration earlier this week, clearing the way to sell as much as $100 million in new shares, with existing shareholders unloading as many as 45.2 million more shares. It's only the new shares that would be dilutive, but pre-IPO investors paving the way for an exit strategy would dramatically increase the stock's float.

It's not a surprise to see Amplify raise money. It's been on a buying spree, and its leveraged situation can use some liquidity. However, the timing is terrible. Filing this just as a poorly received report is sending the stock to a fresh all-time low -- and well below last year's IPO price of $18 -- and it isn't very comforting.

Wall Street wasn't happy, with at least three analysts souring on the stock following the problematic quarterly report. Oppenheimer'sRupesh Parikh knocked the stock down from outperform to perform, based on the execution issues that fueled the weak results. He's concerned about Amplify's earnings trajectory at this point.

Credit Suisse analyst Robert Moskow lowered his rating to neutral, slashing his price target from $18 to $13. He's also shaking his head at the execution missteps and the larger investments necessary to get back on track. With competitive challenges looming, Moskow isn't sure about the sustainability of Amplify's once-heady growth rate.

Over at SunTrust, William Chappell Jr. is sticking to his buy rating, but he's lowering his price goal on the stock from $18 to $15. The weak quarter and weaker guidance are troublesome, but Chappell remains upbeat about Amplify's long-term prospects.

It's hard to get excited about a stock after it sheds nearly a quarter of its value in a single day, but there are reasons to be hopeful here. The Tyrrells acquisition is opening the door for the company's existing products to make a push internationally, as well as bringing Tyrrells products to the U.S. market. Amplify Snack Brands is also hopeful that supply-chain savings and innovation resets will get its business back on track next year.

It's also worth noting that the revised price targets of $13 at Credit Suisse and $15 at SunTrust represent a fair amount of upside from today's levels. Amplify Snack Brands is a busted IPO at the moment, but it doesn't always have to stay that way.

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Rick Munarriz owns shares of Amplify Snack Brands. 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.