I have admired JBSS management for the past several years when I was first introduced to this business. For the most part they have done an excellent job managing their business, until this quarter. The walnut inventory was mismanaged in my opinion and this caused a big hit to earnings this quarter as this commodity suffered significant deflation and they could not unload fast enough.. They expressed that it appeared to be a one-time hit that should not continue to occur as inventories have been replenished with walnuts that cost significantly less. It felt like this was a surprise to management and that is what disturbed me more than anything. Also, there was certainly no heads up to investors prior to the conference call.....They knew the impact, but chose not to say anything or guide lower to eliminate the element of surprise. A bit disappointing....
In addition, the export business that we hoped would bring dividends was surprisingly discontinued. Like any business, you take some risks and not everything works out as planned. I admire them for admitting their mistake and moving on. Going forward, I am concerned about revenue growth given the huge deflation in nut costs (walnuts are down 50% from a year ago and almond, too, albeit not as drastic). That is going to create a headwind on the revenue side for the next 12 months. We may find low or no revenue growth for a few quarters. To be fair, other parts of their business appear to be doing well and as they expand their distribution points, the company should continue to do well. They also have some capacity to grow their business without the need to expand. Seems like there is not much catalyst to the stock right now (could see some downside risk at these levels), without a accretive acquisition. They continue to evaluate opportunities, but none have been the right fit to date. I reduced my current position, but am retaining some of it for the long-term. Good luck all.
Management provided a little head up last quarter that this first quarter was going to be soft. How soft is the question of the day. By this date last year, they had already announced earnings and we still are waiting. I think that may be a bad omen. This stock has further downside if this quarter turns out as bad as last quarter, with or without the dividend.
Luishone - You obviously didn't read my message. Does it sound like I am pumping this stock? No, actually the opposite. I am a disappointed long-time shareholder who voted with my pocketbook and sold 3/4 of my holdings. Management didn't accept responsibility for the mistakes of mismanaging their walnut inventory and taking a bloodbath from pushing product out the door. They didn't apologize nor did they own up to it. I have respect for management that acknowledges their mistakes and what they are going to do to prevent it from happening again. So, I voted with my pocketbook and sold 3/4 of my holdings at twice my basis and I disclosed that. I hate negative surprises. They should have given investors a heads up, but they chose not to do that. Of course, they sold a nice chunk of stock before all of this was disclosed, too.
Luishone - I take a different approach to investing....with little focus on the buying and selling side of what the market does as you do. However, I do periodically watch when the insiders are buying and selling, that can be a prediction of where the stock is headed. My analysis focuses primarily on the numbers and management comments since it is an objective way to value the underlying business, without influence on what other traders think. No one can predict the future....all I can say is this Company stumbled terribly this last quarter and I think future profitable growth is a little less certain than it was even just a quarter ago. If they can deliver in future quarters and get back on track, there will be upside. However, another stumble is going to bring this stock down hard and below $45. We'll see what happens with the stock.....Note the executives are not buying any stock at these levels so you may get an entry point lower than this.
Thanks poojing22. Just reviewed the results and another very poor quarter for UG. This company is on a run rate for annual sales revenue of less than $10 million with a $77 million market cap. China is having a very significant, negative impact on the business. They need to figure out a way to get additional distribution channels to avoid this fluctuation in revenue. Yes, management has been saying that 3rd quarter should result in more significant revenue (they hope) and they have a new product which we don't know how it will positively impact the business. I suspect the 2nd quarter is going to be another poor showing - 3rd quarter in a row. There appears to be further downside on this stock based on current trends, despite the rock solid balance sheet and dividend. The only thing holding this stock up is the dividend....and if they keep it in place, they will be paying out far in excess of 100% of earnings for this year. Not good.
Pitsel123 - You might want to re-read my dare post to you to short the stock in the 40's like you were advoacating. Didn't you say it was going down and to short it and the re-buy at $27 after Cramer was bashing the stock? How effective is that strategy working for you?
I don't think Mr. Caporella is going to do another dividend this time around unless he has no buyers. That transaction destroyed shareholder value last time. Let's keep the cash to make it a more attractive takeover candidate. I really feel we are getting close to having a buyer. Wait and see. He promised us long-term shareholders that we would ride off into the sunset with a nice reward. I am in at $13 and change - I can almost buy a Midwestern modest home with my gains and most is tax-free in Roth accounts. Thank you Mr. Caporella. The ride has been just like he promised so far. Don't bet against him. Good luck!