uploads/2016/09/buff-pm-4.png

Blue Buffalo Announces Its Plans for Expansion

By

Updated

Price movement

Blue Buffalo Pet Products (BUFF) has a market cap of $4.7 billion. It fell 2.7% to close at $23.76 per share on September 23, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -4.0%, -7.5%, and 27.0%, respectively, on the same day. BUFF is trading 6.0% below its 20-day moving average, 7.3% below its 50-day moving average, and 4.3% above its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The iShares Morningstar Mid-Cap Growth Index ETF (JKH) invests 0.14% of its holdings in Blue Buffalo Pet Products. The ETF tracks a market-cap-weighted index of mid-cap companies selected by Morningstar based on their growth characteristics. The YTD price movement of JKH was 5.2% on September 23.

The market caps of BUFF’s competitors are as follows:

  • Procter & Gamble (PG) — $234.3 billion
  • The J.M. Smucker Company (SJM) — $16.1 billion

Latest news on BUFF

Blue Buffalo Pet Products is going to expand in Richmond, Indiana, constructing manufacturing and R&D (research & development) facilities.

According to Bill Bishop, Blue Buffalo’s chairman and founder, “we are proud to be expanding our U.S. pet food manufacturing and R&D capabilities here in Richmond, IN. Richmond and the surrounding communities have both the people and the “can do” attitude that it takes to help us meet the growing demand for our natural pet food products.”

The company reported, “it is anticipated that the new Blue Buffalo facility will create approximately 165 jobs in Richmond. Heartland Richmond will produce dry food and become the second company-owned manufacturing facility for Blue Buffalo, with the first facility located in Joplin, Missouri.”

Article continues below advertisement

Performance of Blue Buffalo Pet Products in 2Q16

Blue Buffalo Pet Products (BUFF) reported 2Q16 net sales of $286.9 million, a rise of 13.0% over the $254.0 million reported in 2Q15. The company’s gross profit margin and operating income rose 12.9% and 53.9%, respectively, between fiscal 2Q15 and fiscal 2Q16.

Its net income and EPS (earnings per share) rose to $36.6 million and $0.18, respectively, in 2Q16, compared with $22.6 million and $0.11, respectively, in 2Q15. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and adjusted EPS of $68.3 million and $0.19, respectively, in 2Q16, a rise of 40.5% and 46.2% over 2Q15.

BUFF’s cash and cash equivalents and inventories rose 22.0% and 4.8%, respectively, between 4Q15 and 2Q16. Its current ratio rose to 6.1x in 2Q16 from 3.7x in 4Q15.

Projections

Blue Buffalo Pet Products (BUFF) made the following projections for fiscal 2016:

  • net sales of $1.14 billion–$1.15 billion
  • gross margin of ~44%
  • adjusted EPS of $0.74–$0.76, which excludes costs related to litigation and the company’s secondary public offering
  • capital expenditures of $50 million–$60 million
  • effective tax rate of ~37.3%

In the next part of this series, we’ll take a look at Toyota Motor (TM).

Advertisement

More From Market Realist