The Duckhorn Portfolio, Inc. (NAPA) on Q3 2021 Results - Earnings Call Transcript
Operator: Greetings and welcome to The Duckhorn Portfolio’s Third Quarter 2021 Earnings Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Sean Sullivan, Executive Vice President, Chief Administrative Officer and General Counsel. Sean Sullivan: Good afternoon and welcome to The Duckhorn Portfolio’s third quarter 2021 earnings conference call. Joining me on today’s call are Alex Ryan, Duckhorn’s President, CEO and Chairman and Lori Beaudoin, our Chief Financial Officer. In a moment, we will hear brief remarks from both followed by Q&A. By now, everyone should have access to the earnings release for the period ended April 30, 2021 that went out this afternoon at approximately 4:15 Eastern Time. The press release is accessible on the company’s website at ir.duckhorn.com. And shortly after the conclusion of today’s call, a webcast will be archived for the next 30 days. Alex Ryan: Thank you, Sean and good afternoon. We really appreciate you joining us today. I am very excited to kick off our first earnings call as a public company after our successful IPO launch in March. On behalf of our talented employees, our leadership team and our Board of Directors, I would like to welcome all of our new and prospective investors. I have spent my entire 30-year professional career pursuing my love for winemaking at this illustrious company and I can promise you that we will continue to work hard to grow in a profitable, sustainable and responsible manner for all of our stakeholders over the long-term as we have always done. Following my opening remarks, I will turn things over to Lori Beaudoin, who will discuss our Q3 financial results in greater detail before we open the call for questions. I would like to begin by offering a few highlights from our third quarter performance to emphasize and reinforce the strength of our business and to serve as a lead-in to the five core pillars of our long-term growth strategies that I’ll elaborate more on in a few minutes. Our Q3 net sales were very strong. We grew our top line by over 31% on top of 9% growth in the prior year period. And in looking at volumes, we delivered 41% growth versus 23% growth in the prior year. Nearly as impressive with our sales growth, our depletions grew generally at a similar rate highlighting what strong consumer demand we’re seeing for our high-quality luxury wines. Our diversified, scalable omni-channel platform, once again, was a source of strength in the quarter with positive sales growth contribution from all channels. Lori Beaudoin: Thanks, Alex and good afternoon everyone. It’s great to be speaking with you on our first earnings call as a public company, and I am delighted to share with you our strong results for our third quarter. Net sales for the quarter were $90.4 million, an increase from the prior year of 31.6%. The increase in net sales is primarily attributable to 41% volume growth, which compares to 23% volume growth in the prior year. However, this was partially offset by a negative 9.4% mix contribution as our leading Decoy and Duckhorn brands outpaced the rest of the portfolio and wholesale to distributor sales growth exceeded the growth of our unique California direct to retail and DTC channels. On a like-for-like basis, pricing changes were immaterial to our results. Versus our 31% net sales growth, depletions in the quarter were generally in line, coming in a few percentage points below net sales growth with regional performance being nearly similar across the East and West, excluding California. All channels contributed positively to our top line with wholesale to distributor proving to be the driving force at just over 48% growth as a result of a much faster-than-anticipated recovery in on-premise and an encouraging resiliency in off-premise as society reopens for business. In addition, we realized continued growth in both points of distribution and to a lesser extent, velocities. Gross profit was $46.9 million, an increase of $10.6 million or 29.1% versus the prior year period. Adjusted gross profit for the quarter, which accounts for purchase accounting adjustments related to prior acquisitions, was $47.2 million, an increase of $8.7 million or 22.6% versus the prior year period. The vast majority of the realized margin compression was driven by continued shifts in channel and brand mix, as noted by our outsized wholesale to distributor growth and as Decoy and Duckhorn continue to grow at a faster rate than our other winery brands. Total selling, general and administrative expenses were notably higher versus the prior year, up $18 million or 137% to $31.1 million. However, I’d call out that most of the increase was related to our recent IPO in the form of $8.6 million in equity-based compensation, $2.3 million in non-capitalized transaction expenses and additional increased public company costs such as D&O insurance and professional fees. Our effective tax rate was 38.4%, which was higher than the 26.5% effective rate in the comparative prior year period due to equity-based compensation expense in connection with our IPO. Excluding the impact of equity compensation, our blended effective tax rate was 25.9% for the quarter. Net income was $9 million and diluted earnings per share, was $0.08. Adjusted net income and earnings per share were $17.9 million and $0.17 per share, an increase of 15% and 13%, respectively versus the prior year period results as a result of higher sales volume partially offset by channel and brand mix and increased SG&A. Adjusted EBITDA for the quarter was $32.9 million or 36.4% of net sales versus $31.2 million or 45.5% in the prior year period. The margin decrease was primarily attributable to increased public company costs in the current quarter and reduced SG&A expenses in the prior year quarter, which was at the beginning of the pandemic. Overall, SG&A charges were normalized for COVID-related expenses and public company costs are in line with historical margins. At the end of the quarter, we had cash and cash equivalents of $5 million and net debt of $260 million with a leverage ratio of 2.3x. Looking ahead, we feel confident in our ability to profitably sustain our industry-leading sales growth over the long term. While our rate of growth is not likely to remain at levels realized in Q3, our strong depletions in the quarter, in addition to distributor inventory days on hand still well below normalized levels, suggest a continuation of healthy consumer demand. From a balance sheet perspective, given strong fundamentals, consistent operating cash flow and minimal near-term capital needs, while comfortable at current levels, we expect our leverage to continue to gradually move lower over time, absent any disciplined M&A we may undertake. In summary, the business is performing very well. We’re excited by the opportunities ahead of us, and we remain committed to executing our long-term value creation strategies. With that, I will turn the call back to Alex for closing comments. Alex Ryan: Our track record of consistent execution against whatever backdrop, remarkable brand strength, clear ability to innovate and grow through successful acquisitions in addition to our scaled, highly diversified platform and exceptional leadership team are foundational to our future success. We are deeply committed to sustainable, profitable, long-term growth, and we are confident that we will continue to deliver for our shareholders. As we move forward, our strong and growing cash flow positions us well to unlock shareholder value. While our priority will be to reinvest in the business to support sustained future growth at industry leading margins, we will also seek to reduce our leverage and maintain financial flexibility to pursue strategic M&A if the opportunity presents itself. We remain stewards of capital and we will always strive to optimize shareholder value. With that, Lori and I will be available for your questions. Thank you. Operator: We have our first question coming from the line of Kevin Grundy with Jefferies. Your line is open. Kevin Grundy: Great, thanks. Good afternoon and congratulations to you and your team on the strong quarter. I wanted to start on the strength of the wholesale business outside California. I think it would be helpful to spend some time there as it was really the key driver of upside in the quarter versus expectations. You both mentioned strength in both the on and the off-premise. Can you unpack the factors a bit more for us in terms of where you’re really seeing the strength in the quarter? What were the key drivers of upside versus your own internal models and versus The Street and how this is informing your view here for what we can expect for growth of the business in the near to intermediate term? Maybe just comment on what you’re seeing in the business here in May and early June. Lori Beaudoin: Great. Sure, Kevin. Thank you, and thanks for joining us today. So we did exceed our internal expectations for Q3 with our Decoy and Duckhorn brands driving much of the exceptional growth in the wholesale to distributor channel as we mentioned. Our other winery brands exceeded our expectations as well as on-premise is coming back stronger than we had originally anticipated. Additionally, our DTC channel exceeded expectations as our visitor center saw traffic increases, although they continued to be restricted due to capacity limitations. So with regard to your question as how we see this for the future, so we’re still navigating through times domestically and globally. And in the quarter, we made some investments in marketing, our new product innovations. We’re excited to see the on-premise open and consumers getting back to normal. And we can say that we feel really good about our growth and our underlying business overall. Kevin Grundy: Thanks for that. Just a brief follow-up and then I’ll pass it on because I know there is questions from others. Is there anything you can help us with – so the growth number was really strong. If I’m not mistaken, it was over 40% in the wholesale distribution business outside of California. What’s sort of the expectation here in the near-term? And maybe I’m not sure if you can do anything to help us there between growth rates and the on and off-premise. Understanding the comparisons in the – for the on-premise are going to be pretty easy here in the coming months. So anything you can provide there, I think, would be helpful for us. Thanks. Lori Beaudoin: Sure. Yes. So our Q3 growth was led by off-premise growth in points of distribution as well as velocity. We did see significant growth in on-premise depletions in Q3 with our on-premise depletions above the pre-pandemic levels and growing at a rate 3x the growth rate of our off-premise depletions. And as on-premise rebuilds, we are gaining wine listing placements and continue to see opportunity as on-premise remains far from pre-COVID levels. So we do feel that we will experience – so we don’t feel that we will experience the same rate of growth in Q4 as Q3. Remember that Q3 is comping against a very unique quarter with the onset of the U.S. impact of the pandemic and related business and consumer concern. That being said, we are very excited about Q3 growth rate, and we feel really good about our future growth and our underlying performance. Operator: Thank you. We have our next question coming from the line of Kaumil Gajrawala with Credit Suisse. Your line is open. Kaumil Gajrawala: Hi, everybody. Congratulations. Welcome to the public markets. I guess the first question is on great volume growth in the 40s. Can you maybe just talk about the impact of that kind of growth on your supply chain? Lori, I think you mentioned that inventories at distributors still are quite low. So, Europe quite notably going into the recovery. So how maybe not prepared, but in terms of what is your capability to deliver as we kind of enter this recovery model, which, as you had mentioned, is happening a little bit faster than planned? Alex Ryan: Hey, Kaumil, how are you? It’s Alex. We feel very confident with our supply position. Your observations are obviously very correct. We – our diversified production plan and our fixation on managing inventory very, very carefully, we’re not – we don’t think we’re in a position to have any type of shortcomings at all as this recovery continues to move forward. So we’re confident our ability to supply the market. Lori Beaudoin: And I just might add, Kaumil that – so our internal inventory levels are within our target ranges. And inventory levels for our distributors are on average below our target levels. However, they are not really significantly low. And we are working with our distributors, and they have agreed to revise order lead time on receipt of goods. And they are aware that stock – out-of-stock situations aren’t good for any of us, and we’re all committed to make sure that doesn’t happen. Kaumil Gajrawala: Okay. Great. So it actually sounds like distributor inventories are low not because you can’t supply them but because of their ordering, how much they have been ordering. Alex Ryan: Yes, that would be a better way to look at it, yes. Lori Beaudoin: So we have noticed some impact on distributor levels due to some freight and availability of trucks, and we’ve discussed it at length. They are very aware of it, and we don’t really see any significant concerns there. Kaumil Gajrawala: Okay. Great. And then if I may ask you, really is the topic of the moment for all companies on – around – on and around inflation. From the time kind of when you were going public to now, things are really looking just a bit different. Can you maybe just talk about your input cost environment, how that may have changed, how you plan to deal with it? Lori Beaudoin: Yes, sure. So our business really isn’t susceptible to traditional inflationary risk like you may find with many food or beverage companies. So let me just explain that a little bit. So we have full visibility into our cost of goods for bottled wine, which is to be sold over the next couple of fiscal years. And we also have really good visibility into our near-term bottlings. So the current inflationary pressures will not really impact our gross profit margin immediately in the near-term. In addition to that, Kaumil, we – packaging really is the only material item that will have potential near-term rates as we are bringing in our current materials. So, packaging materials cost range from 20% – 10% to 20% of our total cost of goods. And we have capped – we’ve contract with the – for these materials and capped our inflationary rate at 3% annually. And like I said, the wines we’re going to be selling over the next 2 years or so are already bottled. Operator: Thank you. We have our next question coming from the line of Andrea Teixeira with JPMorgan. Your line is open. Andrea Teixeira: Thank you, good afternoon. I wanted to echo the congrats on the strong results out of the gate. So, also to follow-up on your comments about points of distribution increase and velocity, Lori, before? And also on the margin commentary, so if we see, as you said, you had a huge increase on the distributor side of your business, right? And once we normalize more of the direct to consumer and continue to grow on that and then the mix normalizes, should we actually see margins become better in the fourth quarter and ahead? Lori Beaudoin: Yes. So thank you, Andrea, for your questions. And again, welcome for joining us today. So as we predicted, with regard to your question on points of distribution and velocity, our points of distribution were the primary driver of sales growth in the quarter, and that’s based – that is in line with our expectations. And then to a lesser degree, our growth was around velocity. And remind me of your second question, please. Andrea Teixeira: Yes. So on the margin commentary that you gave, so you said, obviously, you’re contracted for the next 2 years. But now that the mix – you have a headwind on the mix side and basically, Kosta Browne is probably one of the reasons. Like if you can kind of like give us like – it’s not guidance but basically give us an idea from here we will see mix normalizing. In other words, wholesale will do a lot. So you had that 9% headwind on the average pricing. So going forward, is that 9% headwind going to persist or get better and then potentially improve your margin? Lori Beaudoin: Sure. Okay. Thank you. So the gross profit margin pressure is in line with our expectations, Andrea. However, our growth exceeded our growth estimates. So as we mentioned, the vast majority of the margin compression was driven by mix, both in terms of channel as noted by our outsized direct to distributor growth and then also by brand, as our Decoy and Duckhorn brands continue to outpace the growth of our other winery brands. The growth is exciting for us, and we’re very happy to see it. However, it’s a little bit different margin profile. Operator: Thank you. We have our next question coming from the line of Peter Galbo with Bank of America. Your line is open. Peter Galbo: Hey, good afternoon, Alex and Lori. Thank you for taking the question. Alex in your prepared remarks, a couple of times, you mentioned just on-premise has come back much faster than you anticipated. And I guess just can you dimensionalize that for us a little bit? Are you seeing activity levels that you expected in October and you just – they were pulled forward to May? Just kind of help us think through how you would plan for it internally versus what you’re actually seeing on the ground. And then with some of the other commentary around kind of on-premise outside of California versus in California, if you could kind of delineate that for us. Alex Ryan: I think that – I think what – again, Peter, it’s a good question. I don’t think anyone had a really strong crystal ball into how the world was going to kind of come out of shell shock and reenter. Most of the United States has been probably a little faster than we thought coming back, getting out, moving around. Restrictions are all over the board but generally loosening. So we’re probably a little faster than we thought and quite encouraging. As it relates to California, California has been slow to open up, right? So that’s kind of another one – another big market that’s going to open up there pretty quick, we think, by the middle of July so – I mean middle of June. So we feel that it’s going to kind of follow the general positive trend of people mobilizing throughout the country, and we’re encouraged by that as well. Peter Galbo: No, thank you. That’s helpful. And maybe just on the M&A commentary that you gave as well, where kind of private valuations are sitting today, what you’re seeing if the pipeline is still relatively full and kind of how you’re thinking through that over the next 6 to 12 months. Thanks very much guys. Sean Sullivan: Sure. This is Sean. Good afternoon. We continue to thoughtfully consider all M&A opportunities on the horizon. We’re excited about it in the long-term. We discuss. It’s important to remember, we see it, as Alex mentioned, as additive but not necessary for our continued growth. Valuations vary widely and you’d – as you’d expect in a disaggregated market with players of different sizes, capabilities and categories of focus in wine. In the luxury winery brand segment, valuations remain relatively strong, although there really are few wineries of scale trading hands, making the discernment of a broader trend a little more difficult. Given our discipline in determining how best to grow the business, we evaluate potential transactions with a view to the long-term accretive nature of the deals we’re looking at. And accordingly, valuation is a key litmus test, but it’s just one of the many factors that we look at. Operator: Thank you. We have our next question coming from the line of Wendy Nicholson with Citi. Your line is open. Wendy Nicholson: Hi, guys. Congrats on the great quarter. So my first question is on the seltzer business. I think initially, your expectations were very muted, but it sounds like the product is off to a great start. So can you talk about kind of you are, whatever, out of stocks or whether your ability to service the demand, meet the demand and kind of any plans to expand distribution based on how well it’s doing out of the gate. Just give us sort of the state of the union on where the seltzer business is. Lori Beaudoin: Sure. Hi, Wendy, welcome. So yes, so seltzer has just been launched within the last 3 months. It’s a really extremely small piece of our business, and we won’t be reporting on specific products in the future. But regarding seltzer in general, I can tell you that we have been looking at our initial orders, our depletions and our reorders, and we see really strong depletions in the 3 months following the launch. We’re really encouraged by seeing reorders across a number of accounts, and so we really see some positive – and we’re receiving, Wendy, in addition, positive feedback from both our distributors and our retail partners. So we continue to be encouraged and excited by this new product innovation of ours. Wendy Nicholson: Got it. And just in terms of out of stock at this point, no issues. I mean you’re still able to meet the demand? Lori Beaudoin: That’s correct. Yes. We haven’t had any out of stock with regard to our seltzers at all or any products for that matter. Wendy Nicholson: Great. Perfect. My last question is just, Alex, I know you said the tasting rooms are opening up gradually. But can you kind of dimensionalize that? And would you say kind of relative to capacity – I assume you’re still having relatively small numbers of people into the tasting rooms. When do you think you’ll be at full capacity and be able to have them sort of act and feel the way they did pre-COVID? Alex Ryan: Great question, Wendy. Throughout the pandemic, we’ve been treated similar to restaurants and then not so similar to restaurants. So we’ve been operating at 50%. We just moved up to about 70% some odd with outdoor seating, and it’s been all over the board. So we’re not back to where we want to be. We’re not back to kind of that 2019 levels. We think there is a chance they will get back middle of the summer. We think that domestic travel, just by the nature of what we’re hearing about human beings – human nature, people – local domestic people are going to be doing a lot of traveling. We will see about international travel. That’s a little unclear right now. So to answer you quickly, we think by about the middle of summer. Unless something else weird happens in the public health arena, we will kind of get back to what we would call normal. Operator: Thank you. We have our next question coming from the line of Nik Modi with RBC Capital Markets. Your line is open. Nik Modi: Thank you. Good afternoon everyone and congrats on a strong quarter out of the gate. I guess the question for me is just from consumer dynamics. I mean we’ve heard, obviously, there is a lot of trading up that had occurred during COVID across the entire beverage alcohol industry. And I’m wondering what you’ve noticed so far as consumers are starting to get a little bit more mobile. Are you seeing consumers that maybe traded up trade down or do you – how sticky are you seeing the trade up as being? Alex Ryan: Hey, Nik, how are you? Good question. We’re seeing – we’re slowly kind of getting – our best visibility into that is to what people are doing in our tasting rooms with a lesser degree of what we see kind of wholesale. But we think people are I don’t want to say celebratory mood. I think that people want to continue their wine journey, and we think that we have a great platform to offer anything they want along the luxury wine journey. So our indications right now are people are staying with high-level wines and interested in trading up and experimenting. So we’re feeling pretty good about – that is not going to be a dive to the bottom that luxury is still going to stay really popular. Nik Modi: Obviously, it’s a lot cheaper at home than what you’d be paying for glass or a bottle at a restaurant. And so I call this COVID elasticity. Are you seeing any of that? Are you seeing any price shock with consumers in – more on the restaurant side? It has not shifted as much out of the home as you would have thought given the mobility has really, I think, beaten most of our expectations? Alex Ryan: Hey, Nick, sorry, I think we got a technological glitch. I think I only picked up about half of that last question. I apologize. Can you repeat? Nik Modi: Yes, sorry about that. So I’m just wondering, when it comes to the at-home versus away-from-home dynamics, obviously, it’s much cheaper to buy a bottle of Duckhorn and Decoy at home to consume versus going out and having the same brand at a restaurant. So I’m just wondering if you’re seeing any elasticity, any price shock in those on-premise venues that you sell your portfolio? Alex Ryan: Yes. That’s a good question. As of today, I can report we’re not really seeing that. We’re feeling that the people’s need to celebrate might be overriding any concerns there are there. So no evidence of sticker shock. Nik Modi: Got it. Okay, thanks. I will pass it on. Operator: Thank you. We have our next question coming from the line of Lauren Lieberman with Barclays. Your line is open. Lauren Lieberman: Great, thanks. I think a lot has been covered. But I guess one last follow on would be just thinking about the DTC business and the headwinds from Kosta Browne that you guys have very clearly articulated. But as we think forward to tasting rooms reopening at full capacity, how should we think about balancing that with what you already know in terms of that there is just going to be Kosta Browne constraints? And how much of an offset might that be to sort of more, let’s call it, explosive recovery type growth in the DTC channel when you get those tasting rooms going again? Alex Ryan: I don’t think – Lauren, good to hear from you. How are you? I don’t think, we’re going to see a lot of challenges. We’re trained to make sure that our tasting room customers have access to what they want. And yes, we will get from time to time, certain production challenges with certain DTC wines, but they are not going to be material in kind of what we offer for our customers. We will get through quickly this little blip with some Kosta Browne, and I don’t think that’s going to be a long-term issue for us. And so I see that – I see once people come back full tilt to the tasting rooms, which I believe they will, we will have a full range of products at all the flavor profile levels and price levels and luxury that they want to select from. Lauren Lieberman: Okay. What’s interesting though right now is that when you look on your – the tasting room websites, you can’t make a reservation. So the limited – it looks like the limited capacity is selling out. Alex Ryan: That is generally a good way to characterize it. Yes. Lauren Lieberman: Okay. So – and I may have missed it. But what type, if any, visibility do you have into being able to open it more complete capacity? Alex Ryan: We think from based – what we understand in the California regulations, it’s going to be around June 15. With the state of California, you never know. So let’s say we’re thinking mid-summer. Lauren Lieberman: Okay, alright. Great. Thank you so much. Alex Ryan: Thank you. Operator: Thank you. There are no further questions at this time. I will now turn the call back over to the presenters for closing remarks. Alex Ryan: Alright. Thank you all for joining us. It’s been an exciting day. It’s been an exciting presentation. And in closing, I just want to say that we appreciate you taking the time to be with us. We’ve come such a long way since 1976 and so much more to accomplish. Our mission at Duckhorn: To have our wines served wherever fine wines are poured, enjoyed throughout North America and the world. With every bottle we sell, we’re offering an experience and a source of connection with each other. Few companies have proven capable of bridging the two, but we have a lengthy track record of having done so. And we fully intend and continue to build upon our past successes by leveraging our brand strength and scaled luxury platform, the benefit of our loyal customers and long-term stakeholders. Thank you very much again and we will speak with you in early October for our Q4 call. Good afternoon. Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
The Duckhorn Portfolio's Strategic Acquisition and Market Performance
- NYSE:NAPA maintained a "Market Perform" rating by BMO Capital with a raised price target from $9 to $11.
- Shares of NAPA doubled in value following the announcement of an acquisition by Butterfly Equity, priced at $1.95 billion.
- The acquisition aligns with Duckhorn's potential for growth and expansion in the luxury wine market.
The Duckhorn Portfolio, trading on the NYSE:NAPA, is a prominent luxury wine company based in Napa Valley. Known for its premium wines, Duckhorn has established itself as a leader in the North American wine industry. The company competes with other luxury wine producers, focusing on high-quality offerings that appeal to wine enthusiasts and collectors.
On October 7, 2024, BMO Capital maintained its "Market Perform" rating for NYSE:NAPA, advising investors to hold their shares. At that time, the stock was priced at $10.95. BMO Capital also raised its price target for Duckhorn from $9 to $11, reflecting a more optimistic outlook for the company's future performance.
Recently, shares of NYSE:NAPA experienced a dramatic surge, doubling in value. This increase followed the announcement of an acquisition by Butterfly Equity, a private equity firm. The deal, valued at $1.95 billion, is an all-cash transaction, pricing each share at $11. This represents a significant rise from the previous closing price of $5.40 per share.
The acquisition by Butterfly Equity underscores the firm's strategic focus on the food and beverage sector. Duckhorn's stock, which fluctuated between $10.86 and $11.00, has seen a 102.78% increase, equivalent to a $5.55 rise. The company's market capitalization is approximately $1.61 billion, with a trading volume of 46.35 million shares.
Over the past year, NYSE:NAPA's stock has reached a high of $11.08 and a low of $5.38. The acquisition by Butterfly Equity positions Duckhorn for potential growth and expansion in the luxury wine market, aligning with BMO Capital's revised price target and market performance expectations.
The Duckhorn Portfolio's Strategic Acquisition and Market Performance
- NYSE:NAPA maintained a "Market Perform" rating by BMO Capital with a raised price target from $9 to $11.
- Shares of NAPA doubled in value following the announcement of an acquisition by Butterfly Equity, priced at $1.95 billion.
- The acquisition aligns with Duckhorn's potential for growth and expansion in the luxury wine market.
The Duckhorn Portfolio, trading on the NYSE:NAPA, is a prominent luxury wine company based in Napa Valley. Known for its premium wines, Duckhorn has established itself as a leader in the North American wine industry. The company competes with other luxury wine producers, focusing on high-quality offerings that appeal to wine enthusiasts and collectors.
On October 7, 2024, BMO Capital maintained its "Market Perform" rating for NYSE:NAPA, advising investors to hold their shares. At that time, the stock was priced at $10.95. BMO Capital also raised its price target for Duckhorn from $9 to $11, reflecting a more optimistic outlook for the company's future performance.
Recently, shares of NYSE:NAPA experienced a dramatic surge, doubling in value. This increase followed the announcement of an acquisition by Butterfly Equity, a private equity firm. The deal, valued at $1.95 billion, is an all-cash transaction, pricing each share at $11. This represents a significant rise from the previous closing price of $5.40 per share.
The acquisition by Butterfly Equity underscores the firm's strategic focus on the food and beverage sector. Duckhorn's stock, which fluctuated between $10.86 and $11.00, has seen a 102.78% increase, equivalent to a $5.55 rise. The company's market capitalization is approximately $1.61 billion, with a trading volume of 46.35 million shares.
Over the past year, NYSE:NAPA's stock has reached a high of $11.08 and a low of $5.38. The acquisition by Butterfly Equity positions Duckhorn for potential growth and expansion in the luxury wine market, aligning with BMO Capital's revised price target and market performance expectations.
JPMorgan Lowers Duckhorn Portfolio Price Target to $7 Ahead of Q4 Earnings Release
JPMorgan analysts reduced their price target for The Duckhorn Portfolio (NYSE:NAPA) to $7, down from $9, while maintaining a Neutral rating ahead of the company's Q4/24 earnings report, which is scheduled for October 7. The analysts kept estimates for Q4 unchanged, forecasting sales and EBITDA at $104.3 million and $35.1 million, respectively, roughly in line with Street consensus of $105.0 million and $34.7 million, and within the company’s guidance range.
However, the analysts slightly lowered their fiscal 2025 estimates, reflecting potential price and mix pressure from higher promotions and adjusted Sonoma-Cutrer contributions due to slowing growth trends. The updated 2025 forecast now projects sales of $488.5 million, up 22.0%, and EBITDA of $187.9 million, up 25%, with EPS expected to be $0.58, representing a 13% year-over-year increase.
JPMorgan Lowers Duckhorn Portfolio Price Target to $7 Ahead of Q4 Earnings Release
JPMorgan analysts reduced their price target for The Duckhorn Portfolio (NYSE:NAPA) to $7, down from $9, while maintaining a Neutral rating ahead of the company's Q4/24 earnings report, which is scheduled for October 7. The analysts kept estimates for Q4 unchanged, forecasting sales and EBITDA at $104.3 million and $35.1 million, respectively, roughly in line with Street consensus of $105.0 million and $34.7 million, and within the company’s guidance range.
However, the analysts slightly lowered their fiscal 2025 estimates, reflecting potential price and mix pressure from higher promotions and adjusted Sonoma-Cutrer contributions due to slowing growth trends. The updated 2025 forecast now projects sales of $488.5 million, up 22.0%, and EBITDA of $187.9 million, up 25%, with EPS expected to be $0.58, representing a 13% year-over-year increase.
The Duckhorn Portfolio, Inc. Fiscal Third Quarter Financial Performance
- The Duckhorn Portfolio, Inc. reported earnings per share (EPS) of $0.14, slightly below the anticipated $0.15.
- Revenue for the period was approximately $92.53 million, falling short of the expected $93.6 million.
- The company showcased an improvement in gross profit to $51.4 million and a gross profit margin of 55.6%, indicating enhanced profitability.
The Duckhorn Portfolio, Inc. (NYSE:NAPA), a prominent player in the wine industry, recently disclosed its financial performance for the fiscal third quarter ending April 30, 2024. Despite the company's efforts to meet expectations, it reported earnings per share (EPS) of $0.14, slightly below the anticipated $0.15. Additionally, the revenue for the period was approximately $92.53 million, falling short of the expected $93.6 million. This outcome reflects the challenges NAPA faces in a competitive market, striving to maintain its revenue streams and profitability amidst varying conditions.
During the earnings conference call, key company executives, including President and CEO Deirdre Mahlan, provided insights into the company's financial health and strategic direction. The call was a crucial moment for NAPA, as it aimed to reassure investors and analysts about its future plans. Notably, the company's gross profit for the quarter was $51.4 million, an improvement from the previous year, showcasing its ability to manage costs effectively. This was further evidenced by a gross profit margin of 55.6%, indicating a slight enhancement in profitability.
NAPA's financial results also highlighted a modest growth in net sales, reaching $92.5 million, a 1.4% increase from the same period in the previous year. This growth, although modest, demonstrates the company's resilience in sustaining its revenue streams. Furthermore, the company achieved a net income of about $13.32 million during the quarter, with an operating income of approximately $21.70 million and an EBITDA of $31.37 million. These figures underscore NAPA's strategic positioning within the wine industry, managing to generate profit and maintain operational efficiency.
The earnings call was an opportunity for NAPA to address questions from notable analysts, reflecting the company's transparency and willingness to engage with its stakeholders. Despite the slight miss in EPS and revenue expectations, the company's overall positive financial performance and strategic initiatives suggest a strong foundation for future growth. The detailed financial metrics, such as gross profit, operating income, and EBITDA, provide a clearer picture of NAPA's financial health and operational success.
In summary, The Duckhorn Portfolio, Inc. faces the challenge of navigating a competitive landscape while striving to meet investor expectations. The fiscal third-quarter results, though slightly below estimates, reveal a company that is managing to grow and maintain profitability. With a focus on strategic planning and operational efficiency, NAPA continues to solidify its position in the wine industry, aiming for sustained growth and financial stability in the future.
The Duckhorn Portfolio Reports Q3 Beat, Provides Strong Guidance
The Duckhorn Portfolio (NYSE:NAPA) posted its Q3 earnings results yesterday, with revenue of $91.2 million coming in above the Street estimate of $89.79 million. EPS was $0.16, better than the Street estimate of $0.12.
While slowing on-premise sales may be a short-term headwind, management seems to be very confident in its position, heading into a tough economic environment, as a luxury player with scale.
Management sees Q4/23 EPS to be in the range of $0.64-$0.66, compared to the Street estimate of $0.64, and revenue in the range of $400-$404 million, compared to the Street estimate of $402.56 million.
The Duckhorn Portfolio Reports Q3 Beat, Provides Strong Guidance
The Duckhorn Portfolio (NYSE:NAPA) posted its Q3 earnings results yesterday, with revenue of $91.2 million coming in above the Street estimate of $89.79 million. EPS was $0.16, better than the Street estimate of $0.12.
While slowing on-premise sales may be a short-term headwind, management seems to be very confident in its position, heading into a tough economic environment, as a luxury player with scale.
Management sees Q4/23 EPS to be in the range of $0.64-$0.66, compared to the Street estimate of $0.64, and revenue in the range of $400-$404 million, compared to the Street estimate of $402.56 million.
