Key Points
- Vital Farms sources eggs from "happy hens" making its dairy products farm-to-table.
- Demand for cage-free, pasture-raised, sustainable and ethical egg and dairy products continues to grow.
- Vital Farms grew revenues by 30.3% YOY and net income to $25.6 million, up from $1.2 million in 2023 and on its way towards its $1 billion annual revenue target by 2028.
- 5 stocks we like better than Vital Farms
Vital Farms Inc. NASDAQ: VITL sources and markets pasture-raised, cage-free, sustainable and ethical egg and dairy products at a premium. The consumer staples sector company is appealing to the growing trend of consumers migrating to premium "clean label" food. The appeal is not just to customers; investors' shares have been on a parabolic grind, rising nearly 60% year-to-date (YTD). Vital Farms customer base tends to be elastic, brushing off higher prices in exchange for fresh, trusted, premium, high-quality, ethically sourced foods. The company competes with major egg producer Cal-Maine Foods Inc. NASDAQ: CALM, which had a great earnings report despite the egg shortage due to the spread of avian flu.
Vital Farm Spreading Like Wildfire
The company's products are very popular in premium grocers like Whole Foods NASDAQ: WFM and Weis Markets NYSE: WMK to Target Co. NYSE: TGT, Walmart Inc. NYSE: WMT, Giant Group, Ltd. OTCMKTS: GGLT, Safeway Inc. NYSE: SWY and Food Lion OTCMKTS: ADRNY.
Their pasture-raised and organic eggs are known to sport vibrant orange yolks from the "happy hens" that are free to roam on a healthy pasture with at least 108 square feet each. Vital Farms claims to be pasture-raising pioneers, growing from a single farm in Austin, Texas, to the "leading U.S. brand of pasture-raised eggs in the country." Their catchy motto is "Keeping It Bullsh*t-Free."
Vital Farms' Products
Their egg products are pasture-raised and include organic, restorative, True Blue Heirloom (with actual blue shells), hard-boiled and liquid whole variations. They also sell 83% butter fat salted and unsalted butter from grass-fed and pasture-raised cows. Vital Farms cows have access to the outdoors 200 days a year.
Weekly Cup Pattern
The weekly candlestick chart on VITL illustrates a cup pattern. The cup lip line formed at the $26.09 swing high on May 3, 2021. Shares fell to a low of $7.89 by June 7, 2022. Shares staged a rally back to $18.18 by Jan. 17, 2023, but fell back to $10.41 on Sept. 18, 2023. From that point forward, buyers continued to pull shares higher, sending VITL up towards retesting the cup lip line. The weekly relative strength index (RSI) has surged to peak near the 84-band after 10 straight weeks of higher highs. Pullback support levels are at $23.78, $20.18, $18.18, $14.16.
The Bottom Line Surging
On March 7, 2024, Vital Farms reported Q4 2023 revenue growth of 23.4% to $135.81 million, beating consensus estimates by $4.79 million. It crushed EPS consensus estimates by 10 cents, coming in at 17 cents. Net income was $7.2 million compared to $1.9 million in the year-ago period. Adjusted EBITDA rose to $13.9 million compared to $6.9 million.
Full-year 2023 saw net revenues climb 30.3% to $471.9 million, up from $362.1 million. Net revenues rose 28% YOY. Net income rose to $25.6 million, up from $1.2 million. Adjusted EBITDA was $48.3 million compared to $16.2 million.
CEO Insights
Vital Farms CEO Russell Diez-Canseco noted that Q4 2023 was its strongest quarter ever for net revenues. Vital Farms is on track to hit $1 billion in net revenues by 2027. The company made significant progress towards its goal of 35% gross margin and 12% to 14% adjusted EBITDA margin. The roadmap is putting its 2027 targets well within reach. Most of its distribution gains came from expanding its mass channel and existing chains to regional retails in the South, California and Northeast. The average number of stock-keeping units (SKUs) grew with its existing retailers to 2.7, up from 2.4 in 2022.
Diez-Canseco said, "We continue to see faster growth in sales of higher price point SKUs, particularly fueled by strong demand for our 18-count packs and organic eggs. The positive trends in the organic category demonstrate the strong reputation and foundation of the Vital Farms brand. They also show that consumers are increasingly willing to pay a premium to make sustainable and ethical food choices."
Vital Farms analyst ratings and price targets are at MarketBeat.
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