Beyond Meat‘s fourth-quarter results, released after the market close on Thursday, brought to mind a quarterly version of the ’90s hit movie Groundhog Day, wherein Bill Murray’s character relives the same day over and over.
Indeed, the leader in plant-based meat substitutes reported Q4 results that were a close replay of its Q3 results: anemic year-over-year revenue growth, with both the top and bottom lines falling short of Wall Street’s consensus estimates.
The market’s initial reaction, however, was wildly different. Shares closed down just 0.9% in Thursday’s after-hours trading session. By contrast, last quarter, the stock plunged about 20% following the earnings release.
The main reason? Immediately after releasing its Q4 results, Beyond Meat announced that it had inked partnerships with the king of fast-food chains, McDonald’s (NYSE:MCD), as well as another industry giant, Yum! Brands (NYSE:YUM), which owns KFC, Taco Bell, and Pizza Hut.
In 2021, shares of Beyond Meat (which held its initial public offering in May 2019) are up 15% through Thursday’s regular trading session. The S&P 500 has returned 2.2% over this period.
Let’s dig into the Q4 results.
Beyond Meat’s key quarterly numbers
| Metric | Q4 2020 | Q4 2019 | Change |
|---|---|---|---|
| Revenue | $101.9 million | $98.5 million | 3.5% |
| Operating income | ($24.5 million) | ($927,000) | N/A. Loss widened 2,543% |
| Net income | ($25.1 million) | ($452,000) | N/A. Loss widened 5,453% |
| Adjusted net income | ($21.4 million) | ($452,000) | N/A. Loss widened 4,635% |
| Earnings per share (EPS) | ($0.40) | ($0.01) | N/A. Loss widened 3,900% |
| Adjusted EPS | ($0.34) | ($0.01) | N/A. Loss widened 3,300% |
Data source: Beyond Meat. Adjusted figures exclude expenses attributable to the COVID-19 crisis.
As with last quarter, revenue growth was driven by an increase in retail sales, which was largely offset by a decline in food-service sales due to the impact of the COVID-19 pandemic. Promotional activities intended to entice more new consumers to try Beyond Meat products also continued to hurt the top line.
The company ate up $40.0 million in cash running its operations during the quarter, compared with $47.0 million in the year-ago period. It ended the quarter (and year) with $159.1 million in cash and cash equivalents and total outstanding debt of $25.0 million.
Revenue breakdown
| Geographic Distribution Channel | Q4 2020 Revenue | Change (YOY) |
|---|---|---|
| U.S. retail | $62.1 million | 76% |
| U.S. food service | $15.3 million | (43%) |
| U.S. total | $77.4 million | 25% |
| International retail | $13.0 million | 139% |
| International food service | $11.6 million | (63%) |
| International total | $24.5 million | (33%) |
| Total revenue | $101.9 million | 3.5% |
Data source: Beyond Meat. YOY = year over year.
For some context, last quarter, the U.S. segment’s revenue rose 25% year over year. That’s exactly the same as its Q4 performance, though the two components of the segment moved further in their respective opposite directions. In the third quarter, U.S. retail sales increased 41%, while U.S. food service sales fell 11% year over year.
In Q3, the international segment’s revenue dropped 46% year over year, with retail sales climbing 27% and food service sales plunging 65%.
What management had to say
Here’s part of what CEO Ethan Brown had to say in the earnings release:
I am proud of our 2020 achievements in light of the significant challenges we faced, primarily in our foodservice channel, as a result of the COVID-19 pandemic. For the full year, we grew total net revenues 37%, with sales to retail customers more than doubling versus the prior year.
The fundamentals underpinning Beyond Meat’s long-term prospects remain robust, with important brand metrics such as household penetration, buyer rates, purchase frequency and repeat rates all registering another quarter of uninterrupted growth.
Another anemic quarter, but great news on the partnership front
I’ll reiterate what I wrote last quarter:
Beyond Meat turned in a disappointing quarter. Granted, COVID-19 is hurting results. … Nonetheless, people around the world needed to eat during the [fourth] quarter — and Beyond Meat’s top-line result suggests that management didn’t do a great job at meeting consumers where they were at.
That said, long-term investors should keep in mind that one quarter is just one quarter, and doesn’t make a trend. The company remains the leader in a food niche that has significant growth potential.
Of course, the new partnerships are great news. This news could help power the stock higher, at least over the short term.
As part of the three-year global agreement with McDonald’s, Beyond Meat will be the fast-food titan’s “preferred supplier for the patty in the McPlant, a new plant-based burger being tested in select McDonald’s markets globally. In addition, Beyond Meat and McDonald’s will explore co-developing other plant-based menu items — like plant-based options for chicken, pork and egg,” according to the press release. (Emphasis mine.)
As to the Yum! Brands partnership, the companies will “co-create and offer craveable and innovative plant-based protein menu items that can only be found at KFC, Pizza Hut and Taco Bell over the next several years.”
Management didn’t provide guidance, citing continued uncertainty surrounding the pandemic.
Should you invest $1,000 in Beyond Meat right now?
Before you consider Beyond Meat, you’ll want to hear this.
Investing legends and Motley Fool Co-founders David and Tom Gardner just revealed what they believe are the 10 best stocks for investors to buy right now… and Beyond Meat wasn’t one of them.
The online investing service they’ve run for nearly two decades, Motley Fool Stock Advisor, has beaten the stock market by over 4X.* And right now, they think there are 10 stocks that are better buys.
