One of the most interesting stories out of this year's short major league baseball season was that of Daniel Bard, who last pitched in the majors in 2013. A victim of what is known as "the yips", or loss of ability to throw strikes, or throw accurately, experienced by pitchers Steve Blass and Rick Ankiel, and infielders such as Steve Sax, Bard had all but been out of baseball for years, save for a handful of minor league appearances. He officially retired in 2017, and became a "mental skills" coach for the Arizona Diamondbacks. Somehow, in this madness of 2020, 35-year old Bard gave it one more shot, and earned a spot on the Colorado Rockies roster. He pitched well, winning 4 games and saving 6, and earned the "Sporting News National League Comeback Player of the Year" award. Truly, one of the great stories of 2020, and worthy of a movie.
If there was a comeback award for stocks this year, Tupperware (TUP) , a member of my 2020 Tax Loss Selling Recovery Portfolio, would have to be considered. All but left for dead due to declining revenue, and worrisome debt load, this $72 stock in 2017, opened 2020 in the $8 range and fell below $2 in March. Since then, cost cutting, debt reduction, and rebounding sales have propelled shares to the low $30's, up 274% year-to-date.
On Wednesday, TUP reported much better than expected third quarter results. Revenue ($477 million vs. $365 million consensus) and earnings per share ($1.20 vs. 37-cent consensus) trounced expectations, providing a 50% boost in share price since Wednesday. Sales rose 72% in the U.S. and Canada versus the same period last year.
The company reduced the balance of senior notes (due 6/1/2021) through below-par open market purchases by $121 million during the quarter ($220 million year-to-date) to $380 million. Its debt to EBITDA ratio of 3.72 is below debt covenant coverage requirements of 5.25x. The maturity of those notes is less than a year away and is a concern, however, improving revenues and earnings, and a quarter-end cash balance of $149 million, should somewhat mitigate concerns. The company has stated that it will address the debt via more open-market purchases, tender offers, exchange offers, and "other" potential transactions.
TUP still needs to continue to execute, but the turnaround, so far anyway, has been impressive. TUP currently trades at about 11.5x next year's consensus estimates. Perhaps they should consider an ad campaign featuring Daniel Bard. The company and pitcher have some things in common.
