With a $1.88 billion market cap, Weber Inc. (WEBR) manufactures and distributes outdoor cooking products, accessories, consumables, and services in North America, Europe, Australia, and internationally. The company sells its products through an omnichannel network comprising wholesale, direct-to-consumer, and e-commerce channels.
WEBR has recently witnessed a short-lived short squeeze-driven rally. The stock gained 5.5% over the past month to close the last trading session at $6.55. However, it has declined 42.4% over the past six months and 49.3% year-to-date. It is currently trading 64.5% below its 52-week high of $18.43, which it hit on October 15, 2021.
On July 25, WEBR announced the departure of CEO Chris Scherzinger amid declining demand for its products in brick-and-mortar and online stores. The company named Chief Technology Officer Alan Matula as its interim CEO.
“We are taking decisive action to better position Weber to navigate historic macroeconomic challenges, including inflationary and supply chain pressures impacting consumer confidence, spending patterns, and margins. The management team is well positioned to guide Weber through this transitional period and execute a transformation of the company’s cost base,” said Kelly Rainko, Non-Executive Chair of WEBR’s Board of Directors.
The grill maker’s financials are adversely affected due to various macroeconomic factors, including rising inflation, supply chain constraints, geopolitical uncertainty, fuel prices, and foreign currency devaluations. For the third quarter of fiscal 2022, WEBR’s net sales decreased 21% year-over-year, driven by slower in-store and online retail traffic in all key markets. Also, its bottom line declined significantly.
Furthermore, the company has withdrawn its fiscal year 2022 net sales and earnings forecasts. Also, WEBR’s Board of Directors has suspended the quarterly cash dividend.
Here is what I think could influence WEBR’s performance in the upcoming months:
Deteriorating Financials
For the fiscal 2022 third quarter ended June 30, 2022, WEBR’s net sales decreased 21% year-over-year to $669 million, and its gross profit declined 49% from the year-ago value to $154 million. The company’s adjusted loss from operations amounted to $4.02 million, compared to a $122.20 million gain in the prior-year quarter.
WEBR’s adjusted EBITDA declined 91.5% year-over-year to $11.40 million. In addition, the company’s adjusted net loss came in at $51.99 million, compared to a $17.83 million gain in the prior-year period. In addition, as of June 30, 2022, its cash and cash equivalents stood at $40.84 million versus $107.52 million as of September 30, 2021.
Weak Growth Prospects
Analysts expect revenues to decline 42% year-over-year to $203.20 million in the fiscal 2022 fourth quarter (ending September 2022). The consensus loss per share estimate for the ongoing quarter is expected to come at $0.32, worsening 161.6% year-over-year. Also, the company's loss per share for the fiscal year 2022 (ending September 2022) is expected to come in at $0.83.
Furthermore, analysts expect WEBR’s revenue for fiscal 2022 and 2023 to decline 18.1% and 14% from the prior-year period to $1.62 billion and $1.4 billion, respectively.
Low Profitability
WEBR’s trailing-12-month gross profit margin of 30.13% is 17.3% lower than the industry average of 36.42%. Its trailing-12-month EBITDA margin of negative 5.86% compares to the 11.37% industry average. Likewise, its trailing-12-month levered FCF margin of negative 12.53% compares to the industry average of 2.14%.
In addition, WEBR’s trailing-12-month ROTC and ROTA of negative 9.13% and 5.17% compare with the industry averages of 6.91% and 5.23%, respectively.
Consensus Rating and Price Target Indicate Downside
Of the five Wall Street analysts that rated WEBR, four rated it Sell, while one rated it Hold. The 12-month median price target of $4.15 indicates a 36.6% downside. The price targets range from a low of $2.75 to a high of $6.00.
POWR Ratings Reflect Bleak Prospects
WEBR has an overall rating of D, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
WEBR has an F grade for Sentiment, consistent with its revenue and earnings growth estimates. In addition, the stock has a D grade for Quality, in sync with its lower-than-industry profitability metrics.
WEBR is ranked #57 out of 62 stocks in the Home Improvement & Goods industry.
Beyond what I have stated above, we have also given WEBR grades for Value, Stability, Growth, and Momentum. Get all WEBR ratings here.
Bottom Line
WEBR reported disappointing third-quarter 2022 results and suspended its quarterly cash dividend. Furthermore, the grill maker has hinted at slowing growth and declining margins as it suffers from macroeconomic headwinds.
Given WEBR’s poor financials, bleak growth prospects, and lower-than-industry profitability, we think it could be wise to avoid this meme stock now.
How Does Weber Inc. (WEBR) Stack Up Against its Peers?
WEBR has an overall POWR Rating of D. One could also check out these other stocks within the Home Improvement & Goods industry with an A (Strong Buy) rating: Bassett Furniture Industries, Incorporated (BSET), Acuity Brands, Inc. (AYI), and Masonite International Corp. (DOOR).
WEBR shares rose $0.15 (+2.29%) in premarket trading Friday. Year-to-date, WEBR has declined -48.51%, versus a -15.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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