Wunderlich On Inventure Foods: 'On Track, But Leverage Concerns Permeate'

Wunderlich’s Mitchell B. Pinheiro expects Inventure Foods Inc (NASDAQ: SNAK) to witness sequential margin and revenue improvement through 2016, along with overall margins achieving a more normalized run rate in 4Q16.

Pinheiro maintains a Buy rating on the company, with a price target of $10.

Concerns Persist

Followings investor meetings with CFO Steve Weinberger, the analyst mentioned that his view remained “largely unchanged,” with Inventure Foods’ balance sheet continuing to be the primary near term concerns, along with longer term growth constraint.

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“In our view, SNAK will need to either raise equity or sell an asset to grow its key brands,” Pinheiro stated, while maintaining the view that “SNAK’s M&A value is significantly higher than the current valuation and adds downside protection for patient investors as well as potentially meaningful upside in a favorable risk/ reward scenario.”

Improvement Through 2016

The analyst expects 2Q16 EBITDA of $4.2 million, as compared to $1.9 million in 2Q15. Further margin and EBITDA improvements are expected in 3Q and 4Q.

In addition, revenue trends appear on track for double-digit growth during 2H16, driven by easier comps.

“Expanding Snack segment margins on lower co-packer costs and a Fresh Frozen price increase should begin to normalize margins,” Pinheiro believes.