Are Options Traders Betting on a Big Move in Vital Farms (VITL) Stock?

Anheuser-Busch InBev SA/NV BUD, alias AB InBev, has been keen on making investments in its portfolio to drive overall growth. The company has been investing to develop a diverse portfolio of global, international, and crafts and specialty premium brands in its markets. In the latest announcement, the company unveiled a $14-million investment in its Houston brewery, a cornerstone of BUD’s U.S. operations.

More on BUD’s Latest Announcement

Via this latest investment, AB InBev looks to upgrade facilities to retain industry-leading quality standards and drive efficiency; update the critical manufacturing equipment to make beer production possible; install air rinsers on can lines to lower water usage; replace plant infrastructure with the roof of the warehouse, elevators and doors; and update wireless, fiber and copper network connectivity.

This aforesaid investment, along with the prior investments in the Houston brewery and the $22.5 million investment made last year, looks to make advancements to the facility's internal systems in order to enrich workplace safety and boost brewery efficiency. With nearly 1,000 employees in its four facilities in Texas, the company boasts a leading position in the American brewing industry.

To date, the Houston brewery has a crucial role in the $2.3 billion capital investments in Texas. The company operates over 120 facilities across the country and, along with its distributor partners, has 65,000 staff.

In the last five years, the company has invested about $2 billion in its facilities in the country to create and sustain jobs to boost the communities’ economic prosperity.

What’s More About BUD?

Year to date, BUD’s shares have lost 14.1% versus the industry’s decline of 15.4%. AB InBev has been witnessing increased costs, including commodity cost inflation and business investments. Also, the company is prone to the headwinds related to the beverage industry and other macroeconomic challenges.

Nevertheless, BUD’s pricing actions, ongoing premiumization and other revenue-management initiatives have been growth drivers. The company’s relentless executions, investment in brands and accelerated digital transformation have been bolstering sales. The expansion of the Beyond Beer portfolio, and investments in B2B platforms, e-commerce and digital marketing bode well.

This Zacks Rank #3 (Hold) company’s digital transformation initiatives have been on track, with B2B digital platforms contributing about 72% to its revenues in the third quarter of 2024. The company noted that the monthly active user base of BEES reached 3.9 million users in the third quarter. Its omni-channel, direct-to-consumer ecosystem of digital and physical products generated $350 million in revenues in the same quarter.

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings per share (EPS) indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently flaunts a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 82.5%.

Nomad Foods Limited NOMD, manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.

The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.

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Corteva, Inc. CTVA has been making strategic moves to boost overall growth. The company has been focused on maximizing its shareholders’ value. In its latest announcement, CTVA highlighted its strategy of delivering value to shareholders by addressing the global headwinds such as food security; climate change, and its intensifying weather and pressures from insects, weeds and diseases; and the energy transition from fossil fuels, which is leading to higher demand for biofuels. Corteva looks to address these issues through innovation.

The company’s board has approved a new $3-billion share repurchase authorization, which is effective immediately and does not expire.

More on CTVA’s Latest Announcement

Corteva outlined a new financial framework through 2027: $1 billion in higher net sales from growth platforms, ~$1 billion in cost deflation and productivity gains and nearly $4.5 billion in shareholder returns.

CTVA’s six growth platforms, which are core to the aforesaid framework, have been further defined. The first platform is seed and trait out-licensing to reinforce Corteva’s target to be royalty-neutral by the end of 2028; the second is biologicals to target $1 billion in annual revenues by a decade’s end and boost yields; and the third is new crop protection technologies to keep up with the increasing pressures of insects, weeds and diseases.

The fourth platform is gene editing to take advantage of the highly-advanced capacity in the industry, with major germplasm to change the way the world farms; the fifth is biofuels to cater to increasing fuel demand from the long-haul transportation sector with low-carbon alternatives; and the sixth platform is hybrid wheat, proprietary system with a potential to generate yield advantages of up to 20% in a water-stressed landscape.

Such strategic platforms demonstrate the company’s commitment to constant innovations, along with cost and operational effectiveness. It reinvests 8% of its sales into research and development, which is the equivalent of nearly $4 million per day, to resolve farmers’ most intractable problems.

Details on CTVA’s Share Repurchase Plan

The company’s newly authorized program is in addition to its current $2-billion program, which was declared in September 2022. The existing program had nearly $750 million available as of Sept. 30, 2024.

CTVA’s common stock might be repurchased periodically in open-market or private transactions. The actual timing, number and value of shares to be repurchased under its share repurchase program will depend on several factors like market price of its common stock, general market and economic conditions, suitable legal requirements, and other business considerations and capital uses such as organic growth, dividends and acquisitions.

During the nine months ended Sept. 30, 2024, Corteva bought back $757 million and paid dividends of $340 million. Management anticipates repurchasing roughly $ 1 billion shares in 2024, while cash provided by operating activities from continuing operations is likely to be in the band of $2.1-$2.6 billion. Free cash flow is predicted to be between $1.5 billion and $2 billion.

Earlier, this year the company hiked its dividend as well. Such shareholder-friendly actions, coupled with the latest share repurchase authorization, highlights Corteva’s commitment to boosting its shareholders’ value.

What’s More to Know About CTVA?

Corteva’s shares have gained 22.6% year to date, outperforming the industry’s 10.4% decline.

The company’s strategic initiatives are on track. CTVA’s Crop Protection business has been performing well, buoyed by solid demand for its unique technology and gains from deflation. Corteva looks forward to delivering savings of more than $400 million in 2024.

Recently, the company unveiled a revolutionary breakthrough in wheat, which is a first-of-its-kind, proprietary non-GMO hybrid technology. CTVA’s breakthrough hybrid wheat technology looks to grow yield potentially by 10% with the same amount of land and resources; and more resistant to drought. The company currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings per share (EPS) indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 82.5%.

Nomad Foods Limited NOMD, manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.

The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.

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Shares of Monster Beverage Corporation MNST have shown strength in the past three months. The stock has gained 14.3% against the industry’s 8% decline in the same time frame.

The company has been benefiting from the expansion of its energy drinks category and product launches. It has launched various products and expanded distribution across the international markets.

Let us delve deeper.

Analyzing Monster Beverage’s Strengths

Monster Beverage has been driving performance for a while now. In third-quarter 2024, the Monster Energy Drinks segment's net sales grew 0.8% year over year to $1.72 billion. On a currency-adjusted basis, sales for the segment rose 3.9%.

The company offers a wide range of energy drink brands such as Monster Energy, Monster Energy Ultra, Monster Rehab, Monster Energy Nitro, Java Monster, Punch Monster, Juice Monster, Monster Hydro Energy Water, Monster Hydro Super Sport, Monster Super Fuel, Monster Dragon Tea, Reign Total Body Fuel, Reign Inferno Thermogenic Fuel, Reign Storm, True North, NOS, Full Throttle, Burn, Mother, Nalu, Ultra Energy, Play Relentless, BPM, BU, Gladiator, Samurai, Live+, Predator and Fury.

Product innovation plays a significant role in the company's success as well. During the third quarter of 2024, the company launched Monster Ultra Violet in Australia. It launched Monster Reserve, Orange Dreamsicle, Juiced Aussie Lemonade, Juiced Bad Apple, Juiced Mango Loco, Ultra Black, UltraGolden Pineapple, Ultra Peachy Keen, Ultra Rosa, Ultra Strawberry Dreams and UltraWhitein several countries of EMEA. Further launches are planned within all brands throughout EMEA this year.

MNST also launched Papillon in a 500-ml aluminium bottle in Japan and Ultra Peachy Keen in Singapore. The company intends to launch Predator in various additional provinces in 2025. In India, Monster Beverage extended the Predator Gold Strike carbonated 250 ml PET bottle beyond the Delhi region to the Northeast states this July and Madhya Pradesh this September. Management is optimistic about the long-term prospects for the Monster label in China and India, and about the expansion of Predator in these countries.

In addition, the company continues to benefit from its pricing actions across various regions to negate the impacts of rising commodity costs and inflation. Management has been reviewing opportunities for price increases internationally. The company has been making a roughly 5% price increase on its core brands and packages, effective Nov. 1, 2024, in the United States. These have been aiding its gross margin for a while. Gross margin expanded 200 basis points (bps) year over year to 53.2% in the most recent quarter.

High Costs: A Major Concern for MNST

On the flip side, Monster Beverage has been witnessing higher costs for a while now. In third-quarter 2024, operating expenses grew 9.9% year over year due to elevated costs associated with sponsorships and endorsements, increased payroll expenses and expenses related to intellectual property claims. As a percentage of sales, operating expenses expanded 210 bps to 27.6%. Also, selling expenses, as a percentage of net sales, increased 90 bps year over year to 10.4%.

Further, general and administrative expenses, as a percentage of net sales, jumped 150 bps year over year to 12.8%. These expenses may continue to weigh on the company’s overall profitability. Its earnings lagged the Zacks Consensus Estimate and fell year over year during the last reported quarter.

In addition, management highlighted that the energy drink category in the United States witnessed lower growth rates, in the convenience channel, during the last reported quarter. A tighter consumer spending landscape for some income groups and weak demand also remain concerning. Adverse foreign currency exchange rates continued to act as deterrents.

MNST Stock Valuation

Monster Beverage’s stock is trading at a premium valuation relative to the industry. Going by the price/earnings ratio, the stock currently trades at 29.41 on a forward 12-month basis, higher than 19.52 of the industry. Also, the stock is trading higher than its five-year median of 28.89.

Final Words on MNST Stock

The company's pricey valuation and the aforesaid headwinds signal a cautious approach for investors willing to enter at this level. For existing investors, holding onto the stock seems to be a prudent choice, considering the company’s long-term growth potential and robust strategies.

In addition, analysts seem quite optimistic about the company. The Zacks Consensus Estimate for 2024 sales and earnings per share is currently pegged at $7.48 billion and $1.62, respectively. These estimates show corresponding growth of 4.7% and 4.5% year over year. The stock’s Zacks Rank #3 (Hold) supports our thesis.

Stocks to Consider

Freshpet, Inc. FRPT, a pet food company, has a trailing four-quarter average earnings surprise of 132.9%. FRPT currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS indicates growth of 23.4% and 193.3%, respectively, from the prior-year levels.

Vital Farms VITL, which provides pasture-raised products, currently sports a Zacks Rank of 1. The consensus estimate for Vital Farms’ current financial-year sales and EPS indicates growth of 31% and 40%, respectively, from the prior-year levels.

VITL has a trailing four-quarter average earnings surprise of 82.5%.

Nomad Foods Limited NOMD, manufacturer and distributor of frozen foods, currently carries a Zacks Rank #2 (Buy). NOMD has a trailing four-quarter average earnings surprise of 3.1%.

The Zacks Consensus Estimate for NOMD’s current financial-year sales and EPS indicates growth of 4.9% and 25.5%, respectively, from the year-ago figures.

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