Beyond Meat stock rallied after-hours Thursday after announcing multi-year deals with both McDonald’s (MCD) and Taco Bell parent Yum Brands (YUM), even as the fake-meat maker reported mixed fourth-quarter results.
The deals mark the company’s latest efforts to join forces with big fast-food names, following a deal with PepsiCo (PEP) last month.
Under the three-year agreement with McDonald’s, Beyond Meat will be the “preferred supplier” for the patty in a new plant-based burger McDonald’s is testing in select locations worldwide. The burger is called the McPlant.
The two companies will also “explore co-developing other plant-based menu items,” like plant-based substitutes for pork, chicken and egg. A test of a Beyond Meat patty at some McDonald’s locations in Canada ended last year, initially raising concerns Beyond Meat would lose potential business from one of the world’s largest fast-food chains.
Beyond Meat also said it would work with Yum Brands to offer plant-based menu items “over the next several years” at Taco Bell, Pizza Hut and KFC, which Yum also owns.
Beyond Meat Earnings
For the fourth quarter, Beyond Meat lost 34 cents per share. That was more than the 15 cents forecast by Zacks Investment Research. Sales rose 3.5% to $101.9 million, just past estimates for $101.48 million.
Within Beyond Meat’s U.S. retail business, which includes grocery stores, sales came in at around $62 million. However, its U.S. food service business, which includes restaurants, slid 43% to $15.3 million. Food-service sales internationally also tumbled.
The fake-meat maker said it continued to experience “significantly reduced demand” in its food-service business as restaurants make coronavirus-related cutbacks. Beyond Meat has shifted business to grocery stores while the pandemic forces restaurants to limit occupancy and thin down their menus.
The company reported gross margin of 24.9%, down from 34% a year ago.
Beyond Meat continues to lose money as it spends more on new hires and on investments to expand into Europe and China.
Beyond Meat Stock
Beyond Meat stock jumped nearly 18% Jan. 26, the day the deal with PepsiCo was announced. The stock briefly cleared a consolidation, but later gave up those gains.
The pandemic has limited in-restaurant dining. The shift to grocery stores for Beyond Meat hasn’t always been easy.
The company, in its earnings release on Thursday, said that “the surge in demand from retail customers that characterized the early stages of the pandemic as consumers abruptly shifted towards more at-home consumption has moderated.” Management echoed that sentiment in November, when Beyond Meat reported third-quarter results.
The company reported the results after announcing plans last month to form a joint venture with PepsiCo to make snacks and beverages from plant-based protein.
CFRA analyst Arun Sundaram said the Pepsi partnership could “create long-term opportunities” for Beyond Meat. But he emphasized the benefits would not materialize until further down the road.
He said the deal could help Beyond Meat expand from larger meals — like plant-based burgers — into snacks sold in convenience stores, theaters and vending machines.
“That said, we don’t expect this partnership to meaningfully contribute to profits in 2021, while Covid-19 could inflict long-term damage given many smaller, independent restaurants have either closed or are downsizing menus to cut costs,” he said.
“In addition,” he continued, “the competitive landscape is intensifying with Impossible Foods gaining traction in the retail channel, slashing prices, and expanding abroad.”
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