Boulder Brands (BDBD) is a relatively new member of the under $10 universe -- it's part of TheStreet's Stocks Under $10 portfolio -- and one of the bigger decliners in today's session.
First off, my former colleague at TheStreet, Herb Greenberg, deserves a shout-out for raising the red flag on Boulder Brands last year at considerably higher levels. The company makes Smart Balance butter spread, in addition to other natural and gluten-free products.
The stock is down 21% today, changing hands around $7, after the pre-announced, lower-than-expected quarterly results this morning, and the company said co-founder and CEO Steve Hughes has resigned. The company's chief operating officer, James Leighton, will step in as interim CEO as the company seeks a permanent replacement.
Boulder Brands had maintained its annual guidance as recently as May 7, so what changed and are shares worth buying down here since we have a sizable cash position in the Stocks Under $10 portfolio? Is this a potential turnaround story, or not?
The company now expects second-quarter EPS to be flat to $0.02 on revenue of $122 million to $124 million, compared with consensus estimates calling for a profit of $0.04 on $136.1 million of sales. Revenue will decline 5% to 7% from the previous year's quarter, including a 16% to 18% decline in its Balance segment. The Natural segment, including the gluten-free brands, are expected to be flat to up 2% year over year.
One of Jim Cramer's core investment tenets is not to buy a stock in the first year of a new CEO's tenure. I'm going to take that one step further and say you certainly don't want to step in and try to buy Boulder, where the previous CEO left on a sour note. It will likely take a few months to find a permanent replacement, the core Smart Balance brand is not performing well and the steam has come out of the expected growth of its gluten-free brands.
The company is no longer a growth story and even though the stock has fallen 36% so far this year, at north of 20x expected full-year earnings, it isn't cheap enough yet to attract value investors. While Campbell Soup (CPB) and WhiteWave Foods (WWAV) have both acquired smaller, natural/organic firms this week, we do not expect a white knight to go after Boulder Brands in the near term. (WhiteWave is part of TheStreet's Action Alerts PLUS portfolio.)
