Freshpet Stock Jumped as Earnings Beat Expectations. Still, Shares Are Down 50% This Year.

Freshpet has lowered sales guidance two times recently as consumers try to rein in spending. (Courtesy Freshpet)

Shares in Freshpet —a fast-growing company selling fresh, refrigerated pet food—soared 9% on Monday after the company posted net income for the second quarter that beat analyst expectations, even as sales missed the target.

For the three months ended in June, Freshpet’s net sales grew 12.5% from a year ago to $264.7 million, mostly driven by volume gains. Net income was $16.4 million, compared to net loss of $1.7 million in the year-ago period. Analysts polled by FactSet had expected $268 million in sales and $4 million in net income.

CEO Billy Cyr said the firm is adapting to “an economically constrained consumer” and “intensely focused” on what it can control, which includes accelerating advertising and distribution programs, reducing capital expenditures, and strengthening operations. Despite consumer weakness, he noted that the firm continues to outperform peers in the dog food category.

The tough environment will likely continue. For full-year 2025, Freshpet expects net sales to increase 13% to 16% from 2024, adjusted lower from the previous guidance of a 15% to 18% growth. That’s the second cut, as the firm already tuned down its expectations three months ago from the previous guidance of 21% to 24% growth.

The company also cut its expected capital expenditures by $50 million, to $175 million, for the full year. It maintained its outlook for adjusted earnings before interest, taxes, depreciation and amortization—or Ebitda—in a range of $190 million to $210 million.

Freshpet also updated its long-term guidance, removing its $1.8 billion net sales target for 2027. Still, the company expects to continue delivering growth “significantly in excess” of the dog food category. “We still believe we will deliver outsized growth for a long period of time, but we need to plan for the current economic realities,” said Cyr.

Freshpet shares have lost half their value year to date as investors have been worried about whether the firm can maintain the fast pace of growth that boosted the stock to the lofty valuation of nearly 200 times forward earnings last October.

In 2024, Freshpet sales grew 27% from 2023 as the company increased its line of products and sales points, and pet owners increasingly came to prefer fresher, more nutritious food for their furry friends. Investors liked the strong moat around Freshpet as it has placed its own branded fridges in other retailers’ stores, making it harder for competitors to stand out.

On the back of strong sales, Freshpet also delivered full-year positive net income for the first time in 2024 thanks to higher sales, improved gross margin, and reduced logistics costs per sales dollar as the company grows in scale. Management raised its long-term targets for adjusted Ebitda margin to 22% from 18%.

But market sentiment soured this year after the firm’s top-line growth slowed—albeit still at 17.6% for the first quarter and 12.5% for the second quarter. Net income also turned negative again in the first quarter due to increased media expenses and other non-recurring charges.

On Monday, investors were likely encouraged by the positive net income growth in the second quarter, partially thanks to decreased compensation to shareholders and employees. Still, it remains to be seen whether this sentiment could last for the stock’s valuation to rise again.

Among the analysts tracked by FactsaSet who cover Freshpet, three quarters have a Buy rating on the stock, with a an average $94 target price, suggesting 32% upside from the current level.

Write to Evie Liu at evie.liu@barrons.com