Nomad Foods’ Q4 sets up 2021 (NOMD)
Nomad Foods reported Q4 EPS of €.38, a penny above consensus expectations. Management pre-announced results at the CAGNY conference last week. Revenue grew 4.7%, with organic revenue growth of 9.5%, driven by 8.6% growth in volume/mix and a 0.9% increase in price. A calendar shift was a 3.2% headwind, and Fx was a 1.6% headwind. Sales accelerated in late October with restrictions and have remained strong in Q1.
Gross margins expanded 160bps due to mix, pricing, and promotions. Operating expenses increased 15%, driven by incremental ad spending. COGS inflation is expected to be LSD% in 2021. SG&A spend expected to be flat.
Management was targeting €100M in revenues by the end of 2021 for Green Cuisine from €30M in 2020. Management reaffirmed guidance for 2021 with organic revenue growth of 1-2% and EPS between €1.50-1.55. EBITDA is expected to grow in line with total revenue growth of 3-5%. The company’s historical growth and guidance are highlighted below. Nomad Foods is on our Best Idea Long list.
AB InBev Q4 margins disappoint (BUD)
AB InBev reported adj. EPS of $.81, down from $.87 last year, and consensus of $.77. Q4 revenue grew 4.5%, with price/mix up 2.7% and volume growth of 1.6% compared to Q3 revenue growth of 4.0%, with price/mix up 2.3% and volume growth of 1.9%. Organic volumes decreased 0.7% in North America, increased 2.1% in Middle Americas, increased 9.5% in South America, decreased 6.5% in EMEA, and decreased 3% in the Asia Pacific for total worldwide organic volume growth of 1.6%. AB InBev led the US beer industry in total dollar growth in 2020. Sales to retailers in Q4 declined 1.6% compared to an estimate of the industry declining 1.4%. US sales to wholesalers declined 0.5%. In Mexico, the Modelo family of brands had the largest absolute volume growth in the beer category. In Canada, volumes declined LSD% and revenue declined MSD%. In Europe, the business was negatively impacted by renewed on-premise restrictions. Revenue declined in the high teens but was flattish per hectoliter. European EBITDA declined in the double-digits as on-premise carries higher margins in continental Europe. In China, revenue grew 1.1% in the quarter with 0.9% volume growth.
The cost per hectoliter increased 6.4% due to deleveraging, improving from +8.3% in Q3. EBITDA margins contracted 260bps, weakening from -190bps in Q3. US EBITDA margins contracted 295bps due to sales and marketing investments, increased costs for cans, and a tighter freight market. For 2021 margins will continue to be under pressure from commodity headwinds and Fx. The company finished the year with net debt to normalized EBITDA of 4.8x, with 2x still the goal.
Europe is having the largest drag on its recovery, and the slow vaccine rollout will likely keep it that way. The margin headwinds in 2021 have also dampened expectations of a recovery trade. AB InBev still has easy comparisons, and consensus expectations do not have a full recovery in 2022. Shares appear attractive to us at current levels with easy comparisons, low expectations, and an undemanding valuation. BUD is on our Long Bias list.
Monster hard seltzer holding pattern (SAM)
“If you go to the alcoholic side, you’d be then competing with all the other colleagues as the White Claw and Truly, the others that are in that category…. The alcoholic side has become very crowded. And we are reviewing it. We are developing products, but whether we decide to pull the trigger and when and how is – we’re just looking at where the category is going there before we make a decision on that side.” - Rodney Sacks, Co-CEO & Chairman Monster Beverage on last night’s earnings call.
There was no change from management’s commentary at the Jan. 14th analyst day regarding a hard seltzer launch. The latest comments suggest management is less sure about the sustainability of growth in the sector than industry participants. A Monster Hard Seltzer offering would likely represent the largest competitor who has not entered the hard seltzer sector.
