Reynolds Consumer Products Attracts Institutional Attention
Reynolds Consumer Products Inc. (NASDAQ: REYN) share price has had a hard time gaining traction since the IPO but we think that may be about to change. The institutions have been actively buying the stock and their activity is picking up. Total institutional activity for the last 12 months is net bullish in the amount of $393.38 million or about 6.7% of the market cap with shares trading near $28. The key takeaway is that $341 million of that money was spent in the to-date period of Q1 2022 and is still growing. That’s worth about 5.7% of the company’s market cap and brings the total institutional ownership up to 27.7%. That’s still a small amount but is up 20% YOY and suggests this company’s stock value will be going higher.
The insiders are buying too, reinforcing the idea of higher share prices, but their holdings are small. The total insider holdings are only 0.05% of the company and too small to really affect share prices, the takeaway here is that 100% of insider activity has been bullish and there is analyst support as well. The stock has five ratings less than a year old and they amount to a weak buy. The most recent two came out in January and included one downgrade and two price target increases as surprising as that may sound. The downgrade is to Neutral from Buy with a price target of $35. That compares to the consensus of $34 which implies about 20% of upside for the stock. The bottom line, the analysts are telling their people to either Buy or Hold what they have.
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Demand High, Inflation Weighs On Reynolds Outlook
Reynolds Consumer Products had a good quarter, even a great one, but there is a problem with the numbers and the outlook. The $1.02 billion caps off a record-setting quarter and is up 18% from last year but is only as expected. This is compounded by margin weakness that is yet to catch up with inflation and an outlook that includes the same. On a segment basis, the core Reynolds Cookware segment led with growth of 23% followed by a 12% increase in Hefty Tableware, a 9% increase in Hefty, and a 9% increase in Presto. Revenue gains are primarily due to price increases, however, and more are expected in the coming fiscal year. On the bottom line, the $0.51 in adjusted EPS beat by $0.02.
Turning to the guidance, the company is expecting revenue growth in fiscal 2022 and well above the consensus. The +9% to +12% range tops the consensus at the low end and there is upside risk due to pricing increases alone. The company is expecting to raise prices again and we think maybe more than once because the guidance for earnings is weak. The company is expecting EPS in a range with the high end at $1.70 compared to the consensus of $1.74 which is indicative of margin pressure. Regardless, the company’s 3.28% dividend appears to be in no danger and there is still a positive outlook for distribution increases.
The Technical Outlook: Reynolds Consumer Products Is Testing Support
Shares of Reynolds Consumer Products have been range-bound since the IPO and are still range-bound today. The Q4 results and outlook were enough to spark a small pop in the share price but the glow wore off fast and now price action is testing support. Support is near the $28 and possibly strong enough to keep the stock from falling further. If the price action falls below $28 it will probably fall to $27 and the lowest levels in almost two years.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Reynolds Consumer Products (REYN) | $28.68 | +0.8% | 3.21% | 20.20 | Hold | $29.80 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
