Tupperware Brands (TUP) Upgraded to 'Buy' at Citi on Encouraging Turnaround Progress, Shares Gain

May 7, 2021 10:01 AM EDT
Get Alerts TUP Hot Sheet
Price: $20.28 -4.25%

Rating Summary:
    4 Buy, 8 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 15 | Down: 13 | New: 24
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Citi analyst Wendy Nicholson upgraded Tupperware Brands Corp (NYSE: TUP) to “Buy” from “Neutral” to reflect “encouraging” turnaround progress the company has made recently.

The analyst believes the current stock valuation doesn’t reflect the progress made since the transformation began in 2020. TUP stock is down 33% compared to S&P 500.

“In addition to the strong opportunity to improve profitability and earnings in the near- to medium term, and further strengthen the balance sheet, we see real potential for TUP to broaden its product offering and expand its distribution strategy over the next several years,” the analyst said in a memo.

After a few years of plunging sales and low profitability, the company has decided to restructure its business which resulted in strong sales momentum and a meaningful improvement in margins.

“We see room for profitability and earnings to improve further as mgmt has successfully begun to cut costs, for which there is still plenty more room. As TUP has repaid debt, this has come with commensurate interest rate declines & with potentially more asset sales to come, interest expense could decrease further. And, TUP continues to work on lowering its tax rate, which has been extraordinarily high in recent years, to sub-30%.”

The company is hoping to have a sales mix of 50/50 between traditional direct selling and other distribution channels.

“While the turnaround is still early days and there is uncertainty about how this will come together, we think there is a real opportunity for TUP to build an omnichannel brand and business, which could lead to more consistent growth over time.”

Although he notes concerns related to tough compares, rising commodity costs, and the “stickiness” of the business improvement, Nicholson argues that a lot of these concerns are already reflected in the price.

A new price target on TUP is $36.00 per share from $31.00 earlier.

TUP stock price has soared over 7% today.

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