The color drained from MGP Ingredients stock on Friday morning, after the Kansas-based distiller warned that unsold whiskey left it with a sales shortfall. The shares (ticker: MGPI) were down 24% by midmorning, to $40.
In May 2019, Barron’s noted that MGP stock was a high-price bet that it could expand from contract distilling for other people’s brands, to aging and selling its own whiskey. Hoping to benefit from the bubbling popularity of craft bourbons, MGP built an inventory of distillate that it told investors would triple in value after a few years of aging. With the stock at $67 and 25-times earnings, Barron’s worried about MGP’s ability to compete in a market already awash in hundreds of whiskey brands.
MGP’s June quarter offered the first hint that its bet on aging its own whiskey wasn’t working. Its sales of aged whiskey fell in that quarter.
Friday, the company announced that sales for 2019 had been $362 million—well short of the $391 million forecast of analysts surveyed by FactSet. Instead of the nearly $2.60 in per share earnings expected for the year, MPI now expects to report between $2.20 and $2.30 a year.
Its failed bet on aging whiskey was to blame. “The shortfall versus our previously communicated guidance is the result of us ultimately being unsuccessful in transacting a large portion of the aged whiskey sales we had forecast for the fourth quarter,” said chief executive Gus Griffin, in the announcement.
The company had thought it had a “line of sight” to the aged sales, Griffin said, but would now conduct additional analysis to “better understand the aged whiskey market.” MGP will release it full financial results on Feb. 26.
Meanwhile, the well-managed American bourbon champ Brown-Forman (BF. B) has thrived. Since the Barron’s article in May, its shares have floated from $50 to $70, leaving them at a generous 39-times the earnings expected for the company’s current fiscal year ending March.
While it’s too soon to say that MGP stock is on sale, the company’s warehouse full of whiskey surely will be.
Write to Bill Alpert at william.alpert@barrons.com
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January 17, 2020 at 11:48PM
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MGP Ingredients Stock Is Plunging on Disappointing Whiskey Sales Numbers - Barron's
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