Beyond Meat slumps 16% amid Q2 earnings and macro uncertainty

Shares of California-based manufacturer of plant-based meat substitutes Beyond Meat (BYND.US) are losing more than 15% after results - the company failed to beat earnings and revenue expectations. It cited weaker demand in an inflationary, challenging economic environment. Investors took the results as a warning signal - in the event of a possible weakening of the economy and thus a further decline in product demand, the pressure on Beyond Meat could accelerate. The company's revenues fell 30.5% in the second quarter and 40% in the US - not even price cuts helped. The company lowered its full-year revenue forecast.

Weaker revenue, flat earnings per share

• The company reported revenue of $102.1 million in Q2. According to FactSet analysts, this was less than the $108.7 million estimated by Wall Street. International foodservice demand was flat compared to the same period last year, but retail sales fell nearly 16%;
• Net loss narrowed to $53.5 million ($0.83) per share, thanks to lower logistics and production costs. The result was only slightly better than forecasts for a loss of $0.84 per share;
• Beyond Meat estimates 2023 revenue of $360 million to $380 million against forecasts of $375 million to $415 million at the end of Q1. During a conference call with investors, chairman and CEO Ethan Brown said the company faced tough base effects from 2022.

Business model - a victim of cyclicality?

• In the summer of 2022, a new product imitating beef drove sales in the U.S., with the restaurant industry opening up after the pandemic by placing a lot of orders. According to Brown, the company fell victim to unfair allegations of over-processing its products and using unhealthy ingredients.
• Beyond Meat is to rectify this by creating a professional media campaign - aimed at promoting health and transparency in the production process. The company sees a sales catalyst in the form of more contracts with fast food chains like McDonald's (they have partnered with the company but for the moment mainly outside the US).
• The company's CEO indicated that Q2 was definitely a sales bottom for the company, further fueled by the effect of a high base from the same period in 2022. However, the market seems to 'not buy' the CEO's argument and rated the weaker report as much more important than the CEO's own estimates. Of particular concern is the 40% y/y decline in US sales despite relatively strong consumers (as indicated by data from many other companies). Investors are trying to assess whether it is definitely not Beyond Meat's products themselves that are the company's significant problem.  

Beyond Meat shares, H4 interval. Source: xStation5