Vital Farms Thrives on Ethical and Sustainable Food Demand

Vital Farms Inc. (NASDAQ: VITL) is a leading producer of ethically sourced and sustainable eggs and butter. Their pasture-raised hens are hand-fed and free to roam in its network of more than 350 small family farms year-round. Each hen has access to 108 square feet of land to roam, ensuring a healthier lifestyle and a more flavorful product. Its butter is from cows that are 90% grass-fed. Vital Farms products carry a premium price at grocery stores, targeting ethically minded and health-conscious consumers. It continues to grow a loyal customer base through its strong brand identity.

Vital Farms operates in the consumer staples sector and competes with egg producers Cal-Maine Foods Inc. (NASDAQ: CALM) and food producers like Conagra Brands Inc. (NYSE: CAG) and Hormel Foods Co. (NYSE: HRL).

Customers Can Identify and View the Small Farm Pastures

Vital Farms is a disrupter in the egg industry. In addition to ethically sourced and sustainable products, Vital Farms is all about transparency and authenticity. To prove their eggs are actually raised by healthy hens living in pastures, they produce evidence on its website. Customers can actually find the name of the farm where their eggs were made on the side of the carton and enter it into the Vital Farms website to get a 360-degree view of the pasture, complete with sound. Customers can use the site to message a farmer by sending them a note.

Vital Farms is an Asset-Light Business

Despite the name, Vital Farms doesn't actually own any farms. They contract and procure their products from a network of over 350 small farms that are focused on animal welfare, providing pastures and low-stress environments. Vital Farms establishes strict standards for its partner farms to ensure sustainable farming practices and ethical treatment of its animals. They prohibit the use of cages, antibiotics or hormones. Vital Farms procures, packages, markets, and distributes organically cultivated products while providing support and resources for its partner farmers.

Vital Farms owns a state-of-the-art egg processing facility called Egg Central Station, which can wash and package up to 6 million eggs daily and is delivered to more than 24,000 retailers. A new state-of-the-art egg washing and packing facility is planned for Seymour, Indiana.

VITL Completes an Inverted Cup Pattern

VITL stock is still trading up 94% year-to-date (YTD), which exudes the impression of being overbought. The stock has been in profit-taking mode since peaking at $48.41. The daily bearish inverted cup pattern was completed when VITL fell to its gap levels of $33.11 and then completed the gap fill at $30.05. The daily relative strength index (RSI) formed a divergence top on its Q1 2024 earnings report as shares surged to new highs when the RSI continued to fall. The RSI is not oversold at the 25-band. Pullback support levels are at the $30.05 gap fill, $27.37, $24.87, and $20.87.

Vital Farms Scores Another Egg-cellent Quarter

Vital Farms reported Q2 2024 EPS of 36 cents, beating consensus analyst expectations of 20 cents by 16 cents. Revenues jumped an impressive 38.5% YoY to $147.39 million, crushing the $138.41 million analyst estimate. Gross margin expected 362 bps to 39.1%, up from 35.5% in the year-ago period. Net income rose to $16.3 million, up from $6.7 million in the year-ago period. Vital Farms has no debt and $152.7 million in cash and cash equivalents.

Vital Farms expected full-year 2024 revenues of at least $590 million represent 22% YoY growth, up from previous estimates of $575 million versus $585.75 million consensus analyst estimates. Adjusted EBITDA is expected to be at least $75 million, representing at least 55% YoY growth, which is up from revenue expectations for 45% growth or $70 million. Capital expenditures will be in the range of $35 million to $45 million. 

Vital Farms CEO Russell Diaz-Canseco commented, “We have now passed a milestone of 350 family farms in our network, well on track to meet future demand. Additionally, with our plans for an additional state-of-the-art egg washing and packing facility in Seymour, Indiana, we are in the process of adding another cornerstone piece to our supply chain’s growing capacity to meet our $1 billion net revenue target by 2027.”

Vital Farms analyst ratings and price targets are at MarketBeat. There are seven Wall Street analyst ratings on VITL stock, comprised of five Buys and two Holds, with a 13.55% upside to the average consensus price target of $34.60.

The article "Vital Farms Thrives on Ethical and Sustainable Food Demand " first appeared on MarketBeat.