BRBR – Base Case iCDS 129bps, Negative Case iCDS 207bps, 2030 7.000% Bond YTW of 6.210%, iYTW of 5.384%, B1 Rating from Moody’s, IG4 (equivalent to Baa2) Rating from Valens, Low Refinancing Need
August 5, 2024
- Credit markets are overstating BRBR’s credit risk with a YTW of 6.210% relative to an Intrinsic YTW of 5.384% and an Intrinsic CDS of 129bps. Meanwhile, Moody’s is materially overstating the company’s fundamental credit risk, with its B1 credit rating five notches lower than Valens’ IG4 (Baa2) credit rating.
- Incentives Dictate Behavior™ analysis highlights mostly negative signals for credit holders. That said, as a positive, all members of management are material owners of BRBR equity relative to their annual compensation. This indicates that they may be aligned with shareholders to pursue long-term value creation for the company.
- Earnings Call Forensics™ analysis of the firm’s Q2 2024 (5/7/2024) highlights that management is confident they remain on track to increase weeks of supply by year end, that net working capital growth will exceed sales growth for the year and that their net leverage will remain below 2x. In addition, they are confident Premier shake consumption growth was strong at 29%, that there is upside to both changing aisles and continuing to build their base in the pharmacy aisle, and that they can get display space despite competition from other categories. Lastly, they are confident they are targeting an aggressive back half of the year in terms of supporting marketing and e-commerce for Dymatize.
