UTZ

Utz Brands ($UTZ) CEO Leads Five-Executive Cluster Buy Following 11% Stock Plunge, Despite Improving Results, Debt Concerns Linger

05/06/2025 22:14

Snack manufacturer Utz Brands ($UTZ) has seen significant insider buying activity from top executives following a steep decline in its share price, potentially signaling management's confidence in the company's underlying value. On May 2, 2025, Utz shares plummeted 11% to close at $11.91, representing a 33% decline from around $18 in early June 2024. Despite this weakness, the company's leadership team appears to believe the current price offers an attractive entry point, as evidenced by their aggressive purchasing activity. Notably, May 5th witnessed a substantial cluster buy involving five senior executives purchasing company stock simultaneously. CEO Howard Friedman acquired 6,350 shares at an average price of $11.85 for a total of $75,257, while Director Dylan Lissette purchased 16,776 shares at $11.88, investing approximately $199,254. Additionally, Director Timothy Brown (5,000 shares, $59,785), EVP Chad Whyte (5,000 shares, $59,815), and EVP Theresa Shea (1,689 shares, $19,989) joined the buying spree. Collectively, these five executives invested a total of $414,100 in a single day. This significant insider activity occurred immediately following Utz's Q1 2025 earnings announcement on May 1, adding weight to its significance. The company reported Q1 revenue of $352.1 million, representing a 1.6% year-over-year increase, and adjusted EPS of $0.16, slightly exceeding analyst expectations of $0.15. Particularly impressive was the 4.9% growth in branded salty snacks. The most notable improvement came in profitability. Utz recorded net income of $7.5 million for the quarter, marking a dramatic turnaround from a $3.99 million net loss in the same period last year – a 137.5% improvement. The company's adjusted EBITDA also increased by 3.9% year-over-year to $45.1 million. The disconnect between positive earnings and declining share price appears paradoxical but reflects certain challenges the company faces. Utz's net debt stands at $800.9 million, translating to a leverage ratio of 4.0x based on trailing twelve months normalized adjusted EBITDA of $201.9 million. This debt level, somewhat higher than industry averages, remains a concern for investors. Additionally, the company's return on equity (ROE) is relatively low at 2.2%, significantly below the industry average of 9.4%. However, recent positive signals have emerged. On April 24, investment bank D.A. Davidson upgraded Utz from 'neutral' to 'buy', emphasizing market share gains and potential upside from supply chain improvements despite weak sales. Additionally, on April 17, the company announced the appointment of William J. Kelley Jr. as its new CFO, bringing experience from his previous role as Global CFO at Tropicana Brands Group. This recent cluster buy follows a pattern of executive purchases in February-March 2025, when CEO Howard Friedman (3,525 shares, $49,912), EVP Theresa Shea (1,395 shares, $19,962), and Officer Mitchell Andrew Arends (2,911 shares, $39,968) made sequential purchases. This contrasts with significant selling in November 2024, when CC Collier Holdings, LLC divested 2,815,404 shares for $48,678,335. The broader U.S. market faces challenges, including dollar weakness and declining consumer confidence. On April 7, the U.S. dollar experienced its largest daily decline since November 2022, dropping approximately 1.7%, and has fallen about 6.1% this year. Additionally, U.S. consumer confidence fell to an eight-month low in March due to concerns over tariffs and economic stability. This uncertain macroeconomic environment could pose challenges for consumer goods companies like Utz. Nevertheless, Utz maintains a positive outlook for fiscal year 2025, expecting organic net sales growth in the low single digits, adjusted EBITDA growth of 6-10%, and adjusted EPS growth of 10-15%. The company is pursuing strategic initiatives including geographic expansion, supply chain capability enhancements, and reducing its payout ratio from 76% to 25% over the next three years to allow for greater reinvestment in growth. From an investor perspective, Utz's current share price appears disconnected from its financial performance, a sentiment seemingly validated by management's concentrated buying activity. Considering the company has achieved 39% net income growth over the past five years (significantly outperforming the industry average of 11%), the current weakness in share price may prove temporary. However, high leverage and low ROE remain challenges that need to be addressed.

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