Summary
- J&J put up decent financial figures in fiscal year 2020.
- The company has no long-term debt and plenty of cash.
- J&J forward estimates price in a very rapid recovery from COVID-19.
J&J Snack Foods Corporation (NASDAQ:JJSF) is a company that makes snack foods and frozen beverages that are delivered to retailers and foodservice businesses across the nation. The company’s main product is soft pretzels, which are marketed under a number of different brands. The company’s stock is down approximately 17% on the year but has slowly been rising since March.
(J&J - Google Market Chart, 2020)
We believe that earnings estimates moving forward are a tad ambitious, and these assumptions would push the stock to be trading at higher than historical averages regardless. However, the company is in a strong position for long-term recovery as it has a strong balance sheet, therefore we maintain a neutral sentiment about the company.
Although COVID-19 halted many businesses that J&J serves, the company performed decently in the fiscal year 2020
The company’s net sales for FY 2020 were 1.02B, which is a 13.9% drop from the previous year. The drop was primarily attributed to a large dip in sales in the summer months when coronavirus shut many businesses down, and this is especially important as J&J usually makes the most during summer months due to the seasonal demand for certain products such as slushies. A few of J&J's customers that also have seasonal demand include amusement parks, ballparks, and theatres.
Operating income saw a sharp drop due to the fact that net sales could not make up for rather consistent operating expenses. The company reduced its advertising spend during FY2020 partly due to the pandemic, yet distribution and administrative expense figures were similar to previous years. The company also had unexpected ‘plant shutdown impairment costs’, which amounted to $6.3M.
