Turning Point Brands Beats Estimates For Second Quarter, Raises Guidance

Turning Point Brands, Inc. (NYSE: TPB) reported financial results for the second quarter ended June 30, 2021 with sales increasing 16.8% to $122.6 million. The average analyst estimate for revenues was $106 million according to Yahoo Finance. Net income increased by 49.2% to $15.4 million. The diluted EPS was $0.73 and adjusted diluted EPS was $0.84 as compared to $0.49 and $0.66 in the same period one year ago. This beat the Yahoo Finance average analyst estimate of $0.65.

The solid performance caused the stock to move higher in early trading by 2% to $48. The average analyst price target is $63.

“Our second-quarter performance continued to demonstrate Turning Point’s positive growth momentum, led by our core market segments. Zig-Zag had an exceptional quarter with over 70 percent growth, driven principally by our strategic initiatives and aided by a favorable comparison against a COVID-related disruption in MYO cigar wraps the previous year. Stoker’s also delivered a solid quarter fueled by double-digit growth in our MST business,” said Larry Wexler, President, and CEO, Turning Point Brands.

Vape Challenges

For the second quarter, net sales of NewGen Products decreased 10% to $42.1 million. The company said that the decline was a result of a challenging comparison against the previous year period when TPB’s vape distribution business benefitted from a COVID-related disruption at a B2B competitor and strong B2C orders during state stay-at-home provisions. For the quarter, NewGen Products gross profit decreased 10.6% to $14.1 million. The segment gross margin contracted 20 basis points to 33.5%.

“NewGen performed above our expectations as our vape distribution business was able to navigate the implementation of the PACT Act, which increased the regulatory requirements around transporting vape products,” said Graham Purdy, Chief Operating Officer. “While we still expect short-term volatility in the vape distribution business around the PMTA process and PACT Act, we are encouraged by our current market positioning and potential of our business in a post-PMTA regulatory environment.”

Stokers

Stoker products account for 27% of the company’s sales. For the second quarter, net sales of Stoker’s Products increased 8.3% to $33.4 million on double-digit growth of MST, partially offset by the low single-digit decline of loose-leaf chewing tobacco. MST represented 62 percent of Stoker’s Products revenues in the quarter, up from 58 percent a year earlier. For the second quarter, the total Stoker’s Products segment volume increased 2.4 percent, and price/mix advanced 5.9 percent.

“Our Stoker’s MST business continues its strong growth trajectory and market share gains,” said Purdy. “Our loose-leaf chew business performed well against the previous year period, which had benefitted from a competitor being offline due to a COVID-related disruption.”

Looking Ahead

For the third quarter of 2021, TPB is forecasting net sales of $109 to $114 million. For the full year of 2021, TPB is estimating net sales of $447 to $462 million (up from previous guidance of $422 to $440 million). The company attributed the rosy projections to expected strong double-digit sales growth for Zig-Zag Products and high single-digit sales growth for Stoker’s Products. The company hopes for flat sales growth for NewGen Products (up from previous mid-to-low single-digit declines), which includes low single-digit declines for vape distribution (up from single-digit declines) offset by expected growth in Nu-X. The adjusted EBITDA is forecast to be $108 to $113 million (up from previous guidance of $103 to $108 million).

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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