WhiteWave Foods (WWAV) reports its second-quarter earnings on Friday. Although the stock is up 49% year to date, I think there are plenty of ways to win with WhiteWave. Investors should ride the Wave.
WhiteWave Foods is the fastest-growing food company in the United States. As the trend toward healthy eating sweeps America, WhiteWave is cashing in. During the first quarter, the company grew net sales 10% and operating income 17%. Net sales were $911 million.
Importantly, the growth is coming from increased unit volume. For example, the Silk Almondmilk brand grew 20% and Silk Cashewmilk was the fastest launch in the company's history. Its European plant-based food business, Alpro, was up 23% as nut-based and soy-based beverage sales jumped. The company believes it has 43% market share in Europe in plant-based beverages.
In North America, Horizon Organic dairy saw sales increase 15%. Organic milk was up 8% on 1% volume growth. Even the coffee creamer business jumped 11%.
Sales were so strong in the first quarter, management increased guidance for the second quarter and for the full year. For the full year, management believes the company can achieve low teens sales growth and total operating income growth in the low twenties.
For the second quarter, the consensus is $928 million in revenue and 25 cents per share. For the full year, investors are expecting revenue of $3.8 billion, up 11%. Earnings of $1.14 would be a jump of 14%.
I don't know a food company that is growing this fast, especially by selling more volume and not price increases. Gross margins could increase by almost 100 basis points too.
I think the stock can reach the mid $50s, driven by sales momentum. But there is another way to win with WhiteWave. The company could be an attractive takeover target.
From 2012 to 2014, net sales increased at a 22% compounded annualized growth rate and net income grew at a 33% compounded annual rate. Most think Silk is the largest part of WWAV's business, but really flavored coffee and creamers are the largest part of the business. Coffee creamers make up 42% of sales and are growing at a 10% compounded annual rate. Silk is 30% of sales and growing at a 14% compounded annual rate. Even Horizon, the company's brand of organic milk, is crushing it. The conventional milk business is a single-digit grower at 2% versus Horizon Organic growing at 9%. What's more, the packaged salad business is a double-digit grower at 17%.
Vega, the company's latest acquisition, should begin to contribute to the bottom line this year. The plant-based nutrition company is growing more than 30% as its plant-based nutritional powdered shakes and snack bars have a loyal following.
Top-line momentum, strong unit volume and the possibility the company could become a takeover target keep me riding the Wave.