Egg and butter company Vital Farms (NASDAQ:VITL) met Wall Street’s revenue expectations in Q3 CY2024, with sales up 31.3% year on year to $145 million. The company’s outlook for the full year was close to analysts’ estimates with revenue guided to $600 million at the midpoint. Its GAAP profit of $0.16 per share was 33.3% above analysts’ consensus estimates.
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Vital Farms (VITL) Q3 CY2024 Highlights:
- Revenue: $145 million vs analyst estimates of $145.3 million (in line)
- EPS: $0.16 vs analyst estimates of $0.12 (33.3% beat)
- EBITDA: $15.24 million vs analyst estimates of $12.29 million (24% beat)
- The company lifted its revenue guidance for the full year to $600 million at the midpoint from $590 million, a 1.7% increase
- EBITDA guidance for the full year is $80 million at the midpoint, below analyst estimates of $80.87 million
- Gross Margin (GAAP): 36.9%, up from 33.2% in the same quarter last year
- Operating Margin: 6.4%, up from 4.7% in the same quarter last year
- EBITDA Margin: 10.5%, up from 8.4% in the same quarter last year
- Free Cash Flow Margin: 4.4%, up from 3.1% in the same quarter last year
- Sales Volumes rose 21.7% year on year (13% in the same quarter last year)
- Market Capitalization: $1.59 billion
“Supported by our strong year-to-date performance and a positive outlook for the rest of the year, we are again raising our fiscal year 2024 expectations. Along with raising guidance, we are happy to report that we continue to invest in the long-term capacity of our business. We added to our network of now more than 375 family farms this quarter and our prep work for a new state-of-the-art egg washing and packing facility in Seymour, Indiana is well on track. These are exciting times for Vital Farms, and we are well on the road to meeting our $1 billion net revenue target by 2027,” said Russell Diez-Canseco, Vital Farms’ President and CEO.
Company Overview
With an emphasis on ethically produced products, Vital Farms (NASDAQ:VITL) specializes in pasture-raised eggs and butter.
Perishable Food
The perishable food industry is diverse, encompassing large-scale producers and distributors to specialty and artisanal brands. These companies sell produce, dairy products, meats, and baked goods and have become integral to serving modern American consumers who prioritize freshness, quality, and nutritional value. Investing in perishable food stocks presents both opportunities and challenges. While the perishable nature of products can introduce risks related to supply chain management and shelf life, it also creates a constant demand driven by the necessity for fresh food. Companies that can efficiently manage inventory, distribution, and quality control are well-positioned to thrive in this competitive market. Navigating the perishable food industry requires adherence to strict food safety standards, regulations, and labeling requirements.
Sales Growth
Reviewing a company’s long-term performance can reveal insights into its business quality. Any business can have short-term success, but a top-tier one sustains growth for years.
Vital Farms is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from economies of scale. On the other hand, it can grow faster because it’s working from a smaller revenue base and has a longer runway of untapped store chains to sell into.
As you can see below, Vital Farms’s sales grew at an incredible 34.4% compounded annual growth rate over the last three years as consumers bought more of its products.
This quarter, Vital Farms’s year-on-year revenue growth of 31.3% was wonderful, and its $145 million of revenue was in line with Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 18.4% over the next 12 months, a deceleration versus the last three years. This projection is still admirable and illustrates the market sees success for its products.
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Volume Growth
Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.
Vital Farms’s average quarterly volume growth of 19.9% over the last two years has beaten the competition by a long shot. This is great because companies with significant volume growth are needles in a haystack in the stable consumer staples sector. 
In Vital Farms’s Q3 2024, sales volumes jumped 21.7% year on year. This result was an acceleration from the 13% year-on-year increase it posted 12 months ago, certainly a positive signal.
Key Takeaways from Vital Farms’s Q3 Results
We were impressed by how significantly Vital Farms blew past analysts’ EPS and EBITDA expectations this quarter. We were also excited it raised its full-year revenue guidance. Overall, this quarter had some key positives. The stock remained flat at $36.63 immediately after reporting.
Should you buy the stock or not? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.