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Farmer Brothers’ 1Q16 Earnings Release Not Positive for Stock

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Stock performance

On November 5, 2015, Farmer Brothers (FARM) reported its financial results for 1Q16, which ended September 30, 2015. The stock, which had been rising since the company’s announcement of favorable and stable results for 4Q15, rose nearly 36% since the previous quarter’s results.

In the month of August, shares were trading in the volatile range of $21–$23. The sudden increase in Farmer Brothers stock broke the company’s recent trend, with shares trading well above the maintained price range.

At the beginning of November, the stock rose by 6% and closed at $30.09 on November 2. However, the company’s earnings release on November 5 wasn’t positive for the stock, which fell by 4%. It closed at $29.88 on November 6.

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Farmer Brothers, which has its headquarters in Torrance, California, is a manufacturer, wholesaler, and distributor of coffee, teas, and culinary products. It’s part of the processed and packaged goods industry. Its peers in the industry include Pinnacle Foods (PF), Cal-Maine Foods (CALM), and J.M. Smucker (SJM).

Pinnacle, Cal-Maine, and Smucker closed at $41.83, $57.59, and $115, respectively, on November 6. The iShares Russell Micro-Cap ETF (IWC) invests 0.07% of its portfolio in FARM. It closed at $76.48 on November 6. IWC’s YTD (year-to-date) return is -0.65%. The Vanguard Russell 2000 Growth ETF (VTWG) also invests 0.02% of its portfolio in FARM.

Key highlights of 1Q16

  • Net sales decreased 1.9% to $133.4 million in 1Q16 compared to the prior year period.
  • Gross profit increased $2.5 million, or 5.1%, in 1Q16 compared to the prior year period.
  • Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) and adjusted EBITDA margin in 1Q16 were $10.7 million and 8%, respectively, compared to $10.5 million and 7.7%, respectively, in the prior year period.
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