I initially thought I was seeing things on Wednesday after taking a look at the chart of Tupperware Brands (TUP) , a member of this year's tax-loss selling portfolio. It looked like the occasional bad data point I'd occasionally see back in my Bloomberg days, but this was for real, and frankly it was surprising.
Tupperware, a formerly great and recognizable brand name that had fallen on hard times and was all but left for dead, put up much better than expected second quarter earnings. Revenue of $397 million, while down from last year's $475 million, was well ahead of the $313 million consensus. Earnings per share of 84 cents blew away the 14-cent "consensus" (not much of a consensus with just two analysts weighing in). That sent shares soaring 68% on Wednesday to levels not seen since last October, and this was a $1.15 stock in mid-May.
Cost-cutting measures seemingly did the trick this quarter, and the company reported that it expects to deliver $150 million in net cost savings for 2020. Debt has been an issue, still is, and TUP paid down $98.7 million of its 4.75% 6/21 senior notes during the quarter, taking advantage of the markets disdain for the company's debt, and buying it back at a 43% discount to par. In total, debt fell $188 million during the quarter, from $992 million to $804 million. Since quarter end, TUP has bought back an additional $13.4 million.
There is certainly a lot more work to do on the debt front. The company does have a going concern warning due to its 4.75% bonds (again, they mature next June), which is never good to see as a shareholder. To strengthen liquidity, TUP is putting up 740 acres of Orlando, Florida land it owns for sale, and is expecting to reap $86 million. In addition, it ended the quarter with $120 million in cash, and is expecting further cost cutting to add to the till. Consensus estimates for next year (three analysts) are calling for earnings per share of $2.22, implying a forward PE ratio of 7.
TUP has quickly gone from the worst performer in my tax loss selling portfolio to the second-best performer, up 88%. Keep in mind, the purpose of that portfolio is to identify names that have been hammered by the markets, are sold off at year end by investors to book tax losses, but are profitable, and potentially set up to rebound in the new year. They are not intended to be long-term holds. This year, in fact, I took positions in all names in the portfolio, and will sell them late in the year in order to fund next year's tax loss selling portfolio.
In TUP's case, the next couple of quarters will be crucial.