Analysts at BofA said in a note Friday that the salty snack trend growth is key for Utz Brands' (UTZ) growth in 2024.
The firm, which reiterated a Neutral rating and $13 per share price target on the stock, said that UTZ's 3Q sales were slightly ahead of their expectations due to better pricing and some holiday shipment timing benefits.
"While UTZ maintained FY23 adjusted EBITDA outlook of +8-11% growth, the company lowered FY23 net sales growth outlook to 2-3% (prior 3-5%) with organic sales growth now 3-4% (prior 4-6%)," said the analysts. "3Q vol/mix declined -0.6% YoY, which included ~330bps of headwind related to SKU rationalization, and we estimate holiday shipment benefit was ~110bps tailwind to vol/mix in the quarter."
The investment bank lowered its FY23-FY25 sales forecast for the company, with a "slight tweak up to FY23 adj EBITDA to $187mm, while lowering FY24-FY25 to $196mm and $209mm, respectively."
In addition, the firm noted a general slowing in salty snacks as consumers shift activity into different channels and continue to economize. Furthermore, the analysts expect 2024 will be challenging for category growth to re-accelerate, adding that it could leave UTZ below its trend algo growth of 3-4%.
"As of now, we expect volume growth trends of +1.5% (similar to 3Q’s rate) to persist while pricing should be a lower contributor next year," the analysts added.