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Celsius Holdings (CELH) Before Q2 Earnings: To Buy or Not to Buy?
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Celsius Holdings, Inc. (CELH - Free Report) is likely to register top and bottom-line growth when it comes out with second-quarter 2024 earnings on Aug 6. The Zacks Consensus Estimate for revenues is pegged at $388.87 million, which indicates a 19.3% increase from the year-ago period.
The consensus mark for earnings has dropped by a penny in the past 30 days to 23 cents per share, which implies 35.3% growth from the year-ago quarter’s figure. CELH has a trailing four-quarter earnings surprise of 55.7%, on average.
Our proven model doesn’t conclusively predict an earnings beat for Celsius Holdings this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celsius Holdings has an Earnings ESP of -6.65%, and it currently carries a Zacks Rank #5 (Strong Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors to Note
Celsius Holdings is likely to have benefited from favorable consumer demand for energy drinks. The company’s commitment to innovate and come up with new product launches that cater to evolving consumer preferences has been working well. Its product line includes a variety of flavors and formulations, including carbonated and non-carbonated options, as well as powdered supplements, ensuring its relevance in the dynamic beverage industry.
Expanding the distribution network has been another driver. The company has secured shelf space in major retail chains, convenience stores and online platforms, significantly enhancing its market reach.
Partnerships with leading distributors and retailers, such as Walmart (WMT - Free Report) , Target (TGT - Free Report) and Amazon, have provided a strong platform for future growth. Celsius Holdings' strategic acquisitions and partnerships, including collaborations with industry giants like PepsiCo (PEP - Free Report) and influential fitness brands, further underscore its proactive approach to boosting brand awareness, consumer engagement and sustaining growth.
Gains from these upsides are likely to have contributed to revenue growth in the quarter under review. However, we note that revenue growth has shown signs of deceleration lately. CELH's first-quarter 2024 earnings report highlighted a 37% year-over-year increase in revenues, which slowed down considerably from the triple-digit surge witnessed in previous years. Revenues in the quarter were affected by inventory movements by the company’s largest customer. These inventory fluctuations are anticipated to have persisted, which may have affected revenues in the quarter under review.
Also, there is uncertainty around the sustainability of the high gross margins achieved in the first quarter due to potential pressures from rising fuel and commodity costs. Apart from this, the company has been committed to growth-oriented investments in sales and marketing, which, however, may have weighed on profitability.
Price Performance & Valuation
Celsius Holdings’ shares have plunged 45.5% in the past three months compared with the industry’s decline of 1%. CELH also lagged the broader Zacks Consumer Staples sector and the S&P 500’s respective gains of 4% and 3.1% in the same time frame.
Image Source: Zacks Investment Research
Celsius Holdings appears overvalued from the price-to-earnings perspective. The stock is currently trading at a forward 12-month P/E ratio of 35.08, exceeding the industry average of 16.29 as well as the S&P 500’s 20.76. This premium valuation raises concerns about the stock’s sustainability, signaling the potential for further downside.
Image Source: Zacks Investment Research
Investment Thesis
Celsius Holdings presents a cautious investment case, given the slowing revenue growth, potential margin pressures and heightened competition from industry leaders such as Monster Beverage and Red Bull. Additionally, macroeconomic issues, including persistent inflation and elevated interest rates, have been straining consumer budgets, presenting additional hurdles for this consumer-driven company. While estimates for the current quarter indicate year-over-year growth, these combined challenges place Celsius Holdings in a tough spot. Considering the current stock performance and high valuation, investors might want to exercise prudence and consider looking for greener pastures.
Image: Bigstock
Celsius Holdings (CELH) Before Q2 Earnings: To Buy or Not to Buy?
Celsius Holdings, Inc. (CELH - Free Report) is likely to register top and bottom-line growth when it comes out with second-quarter 2024 earnings on Aug 6. The Zacks Consensus Estimate for revenues is pegged at $388.87 million, which indicates a 19.3% increase from the year-ago period.
The consensus mark for earnings has dropped by a penny in the past 30 days to 23 cents per share, which implies 35.3% growth from the year-ago quarter’s figure. CELH has a trailing four-quarter earnings surprise of 55.7%, on average.
Celsius Holdings Inc. Price and EPS Surprise
Celsius Holdings Inc. price-eps-surprise | Celsius Holdings Inc. Quote
What the Zacks Model Unveils
Our proven model doesn’t conclusively predict an earnings beat for Celsius Holdings this time. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celsius Holdings has an Earnings ESP of -6.65%, and it currently carries a Zacks Rank #5 (Strong Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Factors to Note
Celsius Holdings is likely to have benefited from favorable consumer demand for energy drinks. The company’s commitment to innovate and come up with new product launches that cater to evolving consumer preferences has been working well. Its product line includes a variety of flavors and formulations, including carbonated and non-carbonated options, as well as powdered supplements, ensuring its relevance in the dynamic beverage industry.
Expanding the distribution network has been another driver. The company has secured shelf space in major retail chains, convenience stores and online platforms, significantly enhancing its market reach.
Partnerships with leading distributors and retailers, such as Walmart (WMT - Free Report) , Target (TGT - Free Report) and Amazon, have provided a strong platform for future growth. Celsius Holdings' strategic acquisitions and partnerships, including collaborations with industry giants like PepsiCo (PEP - Free Report) and influential fitness brands, further underscore its proactive approach to boosting brand awareness, consumer engagement and sustaining growth.
Gains from these upsides are likely to have contributed to revenue growth in the quarter under review. However, we note that revenue growth has shown signs of deceleration lately. CELH's first-quarter 2024 earnings report highlighted a 37% year-over-year increase in revenues, which slowed down considerably from the triple-digit surge witnessed in previous years. Revenues in the quarter were affected by inventory movements by the company’s largest customer. These inventory fluctuations are anticipated to have persisted, which may have affected revenues in the quarter under review.
Also, there is uncertainty around the sustainability of the high gross margins achieved in the first quarter due to potential pressures from rising fuel and commodity costs. Apart from this, the company has been committed to growth-oriented investments in sales and marketing, which, however, may have weighed on profitability.
Price Performance & Valuation
Celsius Holdings’ shares have plunged 45.5% in the past three months compared with the industry’s decline of 1%. CELH also lagged the broader Zacks Consumer Staples sector and the S&P 500’s respective gains of 4% and 3.1% in the same time frame.
Image Source: Zacks Investment Research
Celsius Holdings appears overvalued from the price-to-earnings perspective. The stock is currently trading at a forward 12-month P/E ratio of 35.08, exceeding the industry average of 16.29 as well as the S&P 500’s 20.76. This premium valuation raises concerns about the stock’s sustainability, signaling the potential for further downside.
Image Source: Zacks Investment Research
Investment Thesis
Celsius Holdings presents a cautious investment case, given the slowing revenue growth, potential margin pressures and heightened competition from industry leaders such as Monster Beverage and Red Bull. Additionally, macroeconomic issues, including persistent inflation and elevated interest rates, have been straining consumer budgets, presenting additional hurdles for this consumer-driven company. While estimates for the current quarter indicate year-over-year growth, these combined challenges place Celsius Holdings in a tough spot. Considering the current stock performance and high valuation, investors might want to exercise prudence and consider looking for greener pastures.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.