Primo Water Corp. reported a second consecutive slight quarterly earnings miss on Monday.
The Winston-Salem bottled-water company had $873,000 in second-quarter net income, compared with net income of $451,000 a year ago. Primo released the report after the stock market closed Monday.
However, investors chose to focus on Primo lowering its fiscal 2019 sales forecast by $5 million on each end of a range of $312 million to $320 million, while adjusted EBITDA was reduced on the lower end by $3 million to $56 million, and on the upper end by $4 million to $58 million. EBITDA stands for earnings before interest, taxes, depreciation and amortization.
The share price dropped as much as 19% in trading Tuesday. It closed down 17%, or by $2.28, to $11.15. Its 52-week share price range is $10.70 to $20.72.
Primo cited “retail headwinds” and spending on “new promotional activities” for the lowered guidance.
Many analysts put their financial focus on EBITDA when evaluating the performance of a company that has yet to make a profit or is newly profitable.
By comparison, fiscal 2018 sales were $302.1 million and adjusted EBITDA was $55.4 million.
Primo had diluted earnings of 2 cents a share. When excluding non-core acquisition and restructuring charges, adjusted earnings were 8 cents.
The average earnings forecast was 9 cents a share by two analysts surveyed by Zacks Investment Research. Analysts typically do not include one-time gains and charges in their forecasts.
Sales rose 4.6% to $79.3 million.
Primo reported a 5.5% decline in refill sales to $42.3 million; a 5% increase in exchange sales to $21 million; and a 44.5% gain in dispenser sales to just under $16 million.
“Our team continued to execute on our strategic initiatives in the second quarter with net sales and profitability in-line with our expectations,” Matt Sheehan, Primo’s president and chief executive, said in a statement.
“Our exchange and dispenser businesses continue to grow, while we made progress to improve operations in the refill business. I am excited about new promotional activities in the second half of 2019 that we believe will drive future growth.”
For the third quarter, sales are projected in the range of $84 million to $87 million, and adjusted EBITDA in a range of $17 million to $18 million.
“While we certainly support internal investment that can create value over time, which is part of the reason for the lower guidance, the company needs to start executing against its plan,” Petusky said.
“While the remediation of the technology issues at its outdoor machines has been completed, retail store location attrition — at places like Kmart, office supply stores, small grocery stores and dollar channel locations — has mitigated much of the progress that has been made over the past few months on a net basis.”