Midwest Expansion And Boulder Canyon Will Redefine Snacking Culture

Key Takeaways

• Geographic expansion, supply chain optimization, and premium brand integration are driving revenue growth, margin expansion, and competitive advantages in the growing U.S. snacking market.
  
• Innovation in better-for-you products and heightened marketing efforts are increasing household penetration, brand awareness, and supporting sustained improvement in profitability.
  
• Aggressive westward expansion, outdated product focus, rising costs, limited innovation, and fierce competition threaten Utz's ability to sustain profitable growth and margin resilience.

Catalysts

Engages in manufacture, marketing, and distribution of snack foods in the United States.

• Accelerated geographic expansion, particularly into the Midwest and Western U.S. through expanded distribution points and investment in route infrastructure, is unlocking incremental household penetration and driving top line growth, positioning Utz to outperform category peers in revenue growth as the U.S. snacking market and urban populations grow.
  
• Ongoing innovation and premiumization-most notably with Boulder Canyon's rapid growth and clean-label positioning-align with rising consumer demand for "better-for-you" snacks, contributing to mix gains and expected margin accretion as high-margin products take greater share of sales, supporting EBITDA and net margin expansion.
  
• Significant supply chain optimization, including automation, plant consolidation, and productivity initiatives, is leading to sustained gross margin expansion (~6% productivity improvement), with management guiding to further margin improvements in the latter half of the year and into 2026-positively impacting EBITDA and net earnings.
  
• Enhanced marketing investments (notably up 44% YoY in Q2) and effective omnichannel retail execution are driving increased brand awareness and trial across both core and expansion geographies, supporting sustained revenue and household penetration growth.
  
• Strategic portfolio management, including SKU rationalization, premium brand integration (e.g., Boulder Canyon, On The Border), and selective divestitures, continues to drive sustainable revenue and earnings growth through scale benefits and operational synergies, underpinned by long-term secular trends in snacking culture and health-conscious consumer behavior.

Utz Brands Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Utz Brands's revenue will grow by 2.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 1.3% today to 7.8% in 3 years time.
• Analysts expect earnings to reach $119.7 million (and earnings per share of $2.11) by about August 2028, up from $18.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.0x on those 2028 earnings, down from 61.5x today. This future PE is greater than the current PE for the US Food industry at 20.9x.
• Analysts expect the number of shares outstanding to grow by 4.44% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.

Utz Brands Future Earnings Per Share Growth

Risks

• Utz's heavy investment in westward expansion and infrastructure, especially its hybrid direct store delivery model, risks overextending the company geographically; failure to capture sufficient market share in these regions could dilute focus and result in underwhelming revenue growth relative to costs and capital invested.
  
• Reliance on traditional salty snacks-like potato chips, pretzels, and tortilla chips-amidst increasing consumer demand for healthier, high-protein, and lower-processed snack alternatives may constrain long-term organic growth, limiting Utz's ability to drive sustained top-line expansion.
  
• Higher CapEx and accelerated depreciation, combined with increased interest expenses (due to borrowing for infrastructure and productivity investments), are already impacting EPS guidance, suggesting that ongoing high capital requirements and financing costs could weigh on long-term net earnings and margins.
  
• Although portfolio brands like Boulder Canyon offer premium positioning and margin benefits, the risk of limited innovative pipeline in other brands-especially with subcategories like pretzels and tortillas underperforming-could hinder future mix-driven margin expansion, especially as competition intensifies in "better-for-you" and emerging subsegments.
  
• Persistent category-wide promotional pressures and strong retailer/private label competition, coupled with industry consolidation shifting bargaining power to large retailers, may compress pricing power and margin resilience for Utz, putting pressure on both revenues and operating margins over the long haul.

Valuation

• The analysts have a consensus price target of $17.1 for Utz Brands based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $20.0, and the most bearish reporting a price target of just $14.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $119.7 million, and it would be trading on a PE ratio of 28.0x, assuming you use a discount rate of 6.8%.
• Given the current share price of $12.96, the analyst price target of $17.1 is 24.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.