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Bear of the Day: National Beverage Corp. (FIZZ)

·3 min read

National Beverage Corp. FIZZ operates as a holding company and develops, produces, markets and sells a portfolio of juices, energy drinks, soft drinks and sparkling waters primarily in the U.S. and Canada. The company serves retailers as well as smaller accounts via the food-service and convenience distribution channels. FIZZ’s well-known brands include names such as Shasta, Faygo, LaCroix, and Mr. Pure. National Beverage Corp. was incorporated in 1985 and is headquartered in Fort Lauderdale, FL.

Fizzling Out – Known Headwinds

FIZZ, a Zacks #5 Rank (Strong Sell), is a component of the Zacks Beverages – Soft Drinks industry group which ranks in the bottom 10% out of all 254 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months. Candidates in the bottom tiers of industries can often be solid potential short candidates.

While individual stocks have the ability to outperform even when included in a poor-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much tougher. The odds are stacked against FIZZ, and the stock is agreeing with this notion after making a series of lower lows.

FIZZ is also relatively overvalued, irrespective of the valuation metric used:

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Recent Earnings and Future Estimates

The company reported its fiscal second quarter results in December. FIZZ posted quarterly EPS of $0.42, missing the Zacks Consensus Estimate of $0.50 by -16%. The stock has moved steadily lower since the announcement. For the current quarter, Zacks is anticipating a regression in EPS of $0.38, reflecting negative growth of -2.56% year-over-year.

Analysts covering FIZZ have decreased their annual earnings estimates recently. For fiscal 2022, the current Zacks Consensus Estimate sits at $1.85, down -5.61% from just 60 days ago. This would represent a negative growth rate of -0.54% relative to fiscal 2021.

Analysts have also reduced their EPS estimates for fiscal 2023 by -3.81%; the estimate is now $2.02. Declining earnings estimates are a red flag and need to be respected.

Technical Outlook

As illustrated below, FIZZ is in a sustained downtrend. Notice how the stock has plunged below all of the moving averages and is making a series of lower lows. It’s also important to point out that all of the moving averages have rolled over and are sloping downward, the opposite of what bulls would like to see.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

While not the most accurate indicator, FIZZ has also recently experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. FIZZ would have to make a serious move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock.

Bottom Line

A deteriorating fundamental and technical backdrop show that this stock is fizzling out. The fact that FIZZ is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. The company is also relatively overvalued. Potential investors should only think about including this stock in their portfolio as part of a hedge or short strategy.

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