FIZZ Has Double-Digit Potential
March 8, 2018
The American consumer has been unleashed, and people are now acting on renewed confidence in the nation and their own financial situation. I’m excited about the state of the American consumer, and I think we’ll continue to see more signs of spending beyond discount stores and eating at home. We have some exposure to these kinds of names in my newsletters, and one in particular I like is National Beverage (FIZZ).
The company is what you would expect it to be based on its name: a provider of beverages. It has more than 20 brands – including Faygo, Shasta and the very popular LaCroix – of soft drinks, juices, waters, energy and sports drinks, teas and lemonades. It sells those beverages to supermarkets, national chain stores, convenience stores, restaurants, hospitals, schools, wholesale clubs and other establishments.
FIZZ’s drinks, especially the LaCroix sparkling waters, are popular among the younger crowd. The company has targeted millennials, and that strategy has worked well as sales have increased while soda sales have fallen.
Plenty of Growth Ahead
Earnings for the current 2018 fiscal year are expected to grow 32%, and the next five years are expected to see solid growth averaging 22% a year. That’s nicely above the last five years, which averaged still-solid growth of 15.7%. The company also stands to benefit from tax reform, as it has been paying a rate higher than 30%.
FIZZ is due to report again soon, and the Street is looking for $0.68 a share on revenue of $232 million. Both would be up from last year when the company reported $0.52 a share on $194.56 million. FIZZ has beaten consensus in each of the last five quarters, so I’ll be looking for another strong report this time around.
I like this stock a lot right now for several reasons. First, it’s a leader in its field. Second, the last earnings report in December was solid. Earnings grew 53% and came in ahead of consensus, while revenue increased 20% and also beat the Street.
And third, I like that FIZZ has held support at a key level (the black line) amid the market’s recent volatility. I would like to see it recapture its 50- and 200-day moving averages (the blue and red lines, respectively), but as long as this longer-term floor holds my outlook will remain positive.
I expect some backing and filling along the way higher, especially as the market grapples with the increased volatility, but I still expect this stock to retest its previous highs near $130 set last fall.