Vita Coco is the IBD Stock Of The Day Wednesday, as the soft-drink stock surged after posting better-than-expected second-quarter financials and updating its 2023 outlook. COCO soared Wednesday.
Vita Coco, the maker of coconut-water drinks, reported Q2 profits ballooning 1,450% to 31 cents per share, up from 2 cents per share a year ago. Meanwhile, COCO revenue increased 21% to $139.64 million in the second quarter.
Sales of the brand's Vita Coco Coconut Water in the Americas grew 24% to $95 million. The international segment increased 14% to $12.7 million.
Vita Coco stock jumped 15% to 30.28 amid higher-than-average volume Wednesday during market trade.
Analysts in 2023 have viewed the nonalcoholic beverage group as an "inflation hedge," able to pass higher costs to consumers in the form of price increases. Coco Vita management appeared to echo this sentiment in Q2 earnings statements Wednesday.
"The improved profitability resulting from increased Vita Coco Coconut Water pricing and lower transportation costs has allowed us to increase investments designed to drive long-term growth of our brands and improve the capability of our organization," COCO co-founder Michael Kirban said.
Coco Vita Chief Executive Martin Roper added the company benefited from ocean freight cost reductions, "other cost efficiencies throughout our supply chain" and better-than-expected pricing for its products in Q2.
Vita Coco Stock: Margins and Outlook
Vita Coco's second-quarter gross profit was $51 million. The company's Q2 gross margin was 37%, a sequential improvement of more than 500 basis points from Q1 and greater than 1,100 basis points from 25% gross margin in Q2 2022.
COCO gross profit margins contracted from 34% in 2020 to 20% in Q1 2022, but profit margins recovered to 31% in Q1 2023.
For the full year, Coco Vita now expects sales growth of 10%-12% compared to 2022. This prediction is based on midteens Vita Coco Coconut Water growth, according to COCO.
COCO executives forecast full-year gross margins in the range of 35%-37% and adjusted EBITDA between $56 million and $60 million.
COCO Stock Analysis
Vita Coco stock popped 17%, taking a new high in early trade Wednesday. It eased to an 11% gain in afternoon trading, to just below 29.70. That is the level MarketSmith charts pinpoint as an entry in a seven-week cup base. Aggressive investors may have bought near the stock's gap-up opening price on Wednesday, around 28.
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