Eating In and a New CEO Are Recipe for 345% Tupperware Rally

(Bloomberg) -- More people eating at home and enthusiasm about a corporate turnaround campaign have made Tupperware Brands Corp. one of the hottest stocks on Wall Street.

Tupperware shares have soared 345% in the third quarter, giving it the biggest gain in the S&P 1500 Composite Index, which includes far more celebrated stocks like Amazon.com Inc. and Clorox Co. And the rally isn’t over, according to analysts.

The coronavirus pandemic has helped boost sales of kitchenware, including everything from storage containers to baking sets. Also, efforts to convert in-home parties to digital virtual parties during the isolation period have paid off. Last quarter, 15% of Tupperware’s total U.S. sales were through the e-commerce tool, and in June shipments were the highest for any month in nearly 20 years, the company said.

Much of the success is also attributed to the reorganization and cost-cutting initiatives undertaken by Chief Executive Officer Miguel Fernandez, who took over in April. Orlando, Florida-based Tupperware cut costs by more than $60 million in the second quarter, and ultimately expects to slash about $180 million in total annual expenses this year.

“We are becoming a leaner and more centrally organized company,” Vice Chairman Rich Goudis said on the company’s second-quarter earnings call in late July.

The stronger sales and corporate turnaround led D.A. Davidson analyst Linda Bolton Weiser to rate Tupperware a buy when she began research coverage of the eight decade-old company earlier this month. Her 12-month price target on the stock is $30 per share, implying another 41% gain from Monday’s closing price.

“Tupperware is benefiting from more cooking at home and from concerns over food storage and safety,” Weiser said in an interview last week. “Many of Tupperware’s products, kitchenware, gadgets, and storage containers, are on trend right now,” which helped contribute to more than 30% sales growth in the U.S. and Canada last quarter.

That’s a big reversal from double-digit declines seen in each of the prior three quarters. In fact, before the second quarter, Tupperware sales had fallen in every three-month period since late 2017, and they’re still significantly lower than they were back in 2013 when the stock hit a record $96 a share. The company is projected to have revenue of $1.54 billion this year, compared with $2.67 billion in 2013.

Read more: Tupperware Surges to 17-Month High After Bullish Initiation

Still, the stock’s rapid advance over the past three months has pushed Tupperware’s price-to-earnings ratio to around 17 times, the highest in more than three years, and its market capitalization to above $1 billion versus just $210.7 million at the end of the second quarter, according to Bloomberg data.

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