Summary
J&J Snack Foods (NASDAQ:JJSF) reported a disappointing Q1 CY2025 earnings season with revenue falling 1% year on year to $356.1 million, missing Wall Street’s estimates by 3.2%. The company’s non-GAAP profit of $0.35 per share was 48.5% below analysts’ consensus estimates, while its adjusted EBITDA came in at $26.2 million, missing expectations by 26.6%.
Revenue and EPS Decline
J&J Snack Foods total net sales for the fiscal second quarter declined 1.0% to $356.1 million compared to the prior year quarter, driven by lower sales in the Frozen Beverage and Food Service segments, partly offset by growth in the Retail business.
The company’s revenue growth over the last three years has been decent, with a compounded annual growth rate of 8.3%, but this quarter’s decline is a concern for investors. Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months, which is a deceleration compared to the previous three-year period.
Cash Flow Performance
Despite the disappointing earnings report, J&J Snack Foods has shown decent cash profitability, giving it flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.5% over the last two years, slightly better than the broader consumer staples sector.
In Q1, J&J Snack Foods generated $8.94 million in free cash flow, equivalent to a 2.5% margin. Its cash flow turned positive after being negative in the same quarter last year, but this is not a long-term trend and may be influenced by seasonal investment needs.
Market Capitalization and Stock Performance
J&J Snack Foods has a market capitalization of $2.57 billion and its stock traded down 6.1% to $123.98 immediately following the earnings report. The company’s market value is relatively small compared to larger consumer staples companies, but this can also bring advantages such as faster growth potential due to untapped store chains.
Company Overview
J&J Snack Foods is a leading snack food company best known for its SuperPretzel soft pretzels and ICEE frozen drinks. The company produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers. With $1.59 billion in revenue over the past 12 months, J&J Snack Foods is a small consumer staples company that sometimes faces disadvantages compared to larger competitors.
Conclusion
While J&J Snack Foods has shown decent cash profitability and growth potential, its recent earnings report was disappointing with revenue and EPS declining short of Wall Street’s estimates. The stock traded down 6.1% following the report, creating an opportunity for investors to consider buying the stock. However, longer-term business quality and valuation are more important than short-term results when deciding whether to invest in this company.