It's been tough sledding for Celsius (NASDAQ:CELH) for much of the past year. The stock hit a high of nearly $100 last spring before the wheels fell off its growth story, as the company began to lap big U.S. distribution gains and the important convenience store segment began to see traffic struggles.
However, the stock surged after the company announced better-than-expected Q4 results and made an important acquisition. The stock is still down nearly 50% over the past year, as of this writing.
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Let's delve into the company's most recent results and acquisition to see if the rebound can continue.
An important acquisition
After seeing revenue plunge by 31% last quarter due to "inventory optimization" from its largest distributor PepsiCo, Celsius turned in better Q4 results despite some lingering inventory issues. Overall revenue fell 4% to $332.2 million, but that was above the $326 million consensus, as compiled by LSEG.
North American revenue slipped 6% to $311.9 million, while international revenue jumped 39% to $20.3 million. U.S. retail sales as tracked by Circana rose 2% over the past 13 weeks ended Dec. 29, 2024. The company's dollar share was 10.9%, down 50 basis points from a year ago.
Gross margins increased by 240 basis points to 50.2%, which led to a slight increase in gross profits. That was a nice recovery, as last quarter it saw its gross margins plunge to 46%. The improvement was driven by lower freight costs and raw material cost savings. This is a metric to match, however, with tariffs potentially impacting the company's can costs.
However, expenses soared 73%, leading to an 18% decline in adjusted EPS to $0.14. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), meanwhile, fell 4% to $62.9 million.
The big news was Celsius was buying rival Alani Nu for $1.8 billion, or $1.65 billion net of tax benefits, consisting of $1.275 billion in cash and $500 million in shares. The company said the deal was at a 12 times 2024 adjusted EBITDA multiple and 2.8 times sales. It has identified $50 million in synergies and expects the deal to be accretive to EPS in year one. The acquisition is expected to close in the second quarter.
Alani is a female-oriented energy drink maker that has been seeing solid growth in the space. The brand had nearly $595 million in sales last year and has grown by a 50% compounded annual growth rate of 50% since 2022. It also has solid EBITDA profitability, generating EBITDA of $137 million last year.
Combined, the Celsius and Alani brands will have about a 16% market share in the energy drink category. Alani also brings an assortment of other nutritional items, including protein bars, protein shakes, and pre-workout supplements.
Image source: Getty Images.
Can the stock continue to rebound?
The Alani Nu acquisition is a game changer for Celsius that should help it reinvigorate growth. The Celsius brand has always done well attracting female consumers in a male-dominated energy drink market, and Alani Nu leans into this demographic even more than Celsius. Undoubtedly, some of Alani's growth with females has taken some growth away from Celsius, so the combination of the two brands will really let the combined company focus on growing sales within this key demographic.
Eventually, I would expect Celsius to move Alani to its PepsiCo distribution network when appropriate. Distribution gains previously powered Celsius stock, and it can now run the same playbook with Alani to fuel growth. Meanwhile, Celsius has said for its own brand that it will see 15% to 20% shelf space gains this year, which should help lead to a better growth rate in 2025.
Celsius is also leaning into innovation, and recently purchased its co-packer Big Beverages to be able to introduce limited-time offerings. It is also continuing to expand in international markets and entered six new countries in 2024. This is a big opportunity, as it still has a very small international presence compared to competitors Monster Beverage and Red Bull.
After the pop in shares, Celsius trades at a forward price-to-earnings (P/E) ratio of around 33 times, although that does not include any expected contribution from its impending Alani acquisition.
If Celsius can reinvigorate growth of its namesake brand through innovation and shelf space gains, then that valuation looks pretty attractive. Meanwhile, it will have some big opportunities down the line with international markets and expanding Alani Nu distribution. As such, I think investors can consider the stock even after this surge in price.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Celsius and Monster Beverage. The Motley Fool has a disclosure policy.
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