Why Turning Point Brands Stock Crushed it on Thursday
Key Points
The tobacco products purveyor also raised its annual top-line guidance.
It's doing particularly well with "modern" smokeless offerings.
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A double-digit increase in quarterly sales, combined with twin beats on analyst estimates, helped make Turning Point Brands (NYSE: TPB) a popular stock on Thursday. The tobacco company was on fire that trading session as a result, with its shares closing the day more than 11% higher.
Smoking hot
Turning Point booked net sales of $124.3 million during the quarter, for a nearly 17% year-over-year increase. Going in the opposite direction was net income not under generally accepted accounting principles (GAAP), which slid by 11% to $14.8 million, or $0.76 per share.
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Both figures beat the average analyst estimates of $123.8 million for net sales and $0.59 per share for non-GAAP (adjusted) net income.
Turning Point's two major businesses were a study in contrasts during the quarter. The company's Stoker line of smokeless tobacco products saw its top line expand by 48% to $87.6 million. Much of this was due to the sharply increased take-up of what the company calls its "modern oral " products, specifically its pouch tobacco.
On the other hand, its Zig-Zag rolling papers line suffered a 22% decline to $36.7 million.
A dividend laggard
Given that modern oral is Turning Point's hottest product niche, investors were especially cheered by management's guidance raise for it. The company now believes modern oral will bring in $210 million to $225 million in annual net sales in 2026, well up from its previous forecast of $180 million to $190 million.
This should filter down into adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $70 million to $90 million for the year.
Although the quarter was undeniably excellent for Turning Point, and the company is not as burdened with the declining sales of legacy products like certain rivals (such as British American Tobacco), it still suffers in comparison to them. Its dividend yield is low, while those of such peers easily reach into high-yield territory. We can expect those titles to remain more popular as a result.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends British American Tobacco P.l.c. and Turning Point Brands. The Motley Fool has a disclosure policy.
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