(LNCE - Free Report
) has soared nearly 50% off its 52-week low seen in July 2010. The company has managed to deliver two consecutive positive earnings surprises despite rising commodity costs and bargain-hunting consumers.
Analysts expect solid growth for Snyder's-Lance over the next year. The Zacks Consensus Estimate calls for 14% EPS growth in 2011. The stock also offers a dividend yield of 2.7%.
Snyder's-Lance manufactures and markets snack foods throughout much of the U.S. and other parts of North America. The company, formerly Lance, Inc., recently completed its acquisition of another snack food manufacturer, Snyder's of Hanover, in December 2010.
EPS Up 41%
Snyder's-Lance reported third quarter earnings per share of 38 cents, a penny higher than the Zacks Consensus Estimate, and a 41% increase over the same quarter in 2009.
Net revenue growth was very modest, inching 1% higher year-over-year. Both branded and private brands saw higher sales volumes, but much of this was due to significantly higher promotional pricing activity. The company has been forced to provide deeper and more frequent promotions as consumers demand lower prices.
This higher promotional activity led to the gross margin declining from 40.3% of sales to 39.9%. Selling, general, and administrative expenses fell 6% year-over-year, however, leading to a 36% increase in earnings before interest and taxes.
The company realizes that higher commodities costs will affect its margins going forward unless the company implements price increases. CEO David Singer commented that, "[w]e recognize that cost escalations in our important commodities will need to be offset through pricing actions and continued cost efficiencies. We expect that price increases will be needed to maintain our margins as we go into next year, especially in our private brand product portfolio."
The company also narrowed the range of its earnings guidance for 2010 from $1.18 to $1.23 per share, compared to previous guidance of $1.15 to $1.25.
The Zacks Consensus Estimate for 2010 is $1.22, within guidance. This represents 8% EPS growth over 2009. The 2011 consensus is currently 14% higher at $1.39.
It is a Zacks #2 Rank (Buy) stock.
The company has paid a quarterly dividend of 16 cents since 2000. Its dividend payout ratio isn't very low at 52%, so don't expect the company to raise that 16 cent quarterly dividend any time soon.
It currently yields 2.7%.
Shares are trading at 17.4x forward earnings, a premium to the industry average of 16.2x. It has a PEG ratio of 1.2.
Its price to sales ratio of 0.9 is in-line with its peers.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.