Beyond Meat (NASDAQ: BYND) had a tough quarter and the tough times are not over. The company just announced a reduction in its global workforce, which can only mean one thing. Growth prospects have been drastically reduced due to a failure to deliver on expectations. The company test works with Yum! Brands (NYSE: YUM) and McDonald’s (NYSE: MCD) encountered not only a lukewarm response from consumers, but also problems with product availability and quality. Yum! The brands have yet to launch a vegan taco or pizza option and McDonald’s says it’s done with the idea.

The conclusion, however, is perhaps that the company is coming back down to earth, getting in touch with reality so to speak, and can now focus on core operations and profitability instead of chasing growth. The second quarter results were not impressive but enough to show that there is a demand for the product, the question is whether Beyond Meat can deliver it profitably.

“In the second quarter of 2022, we recorded our second strongest quarter in terms of net income, even as consumers lowered protein prices amid inflationary pressures, and we made solid sequential progress in reducing operating and manufacturing conversion costs. Throughout the year, we are closely focused on intensifying operating and manufacturing cost reductions, executing a series of planned market activities for our global strategic partners, and strengthening our retail business through grassroots support and the introduction of one of our best innovations. to date,” says CEO Ethan Brown.

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Lower prices lead to higher volume for Beyond Meat

Beyond Meat reported Q2 net income of $147.04 million, down 1.6% from a year ago. Earnings also missed consensus by 137 basis points, but the important factor for investors to note is that lower prices helped boost selling. The company says the average realized price per book fell 14.2% due to the use of clearance channels and markdowns, but volume increased 14.6% to nearly make up the difference. This bodes well for future sales in consumer channels assuming cost reductions and streamlining can reduce margins enough for profit.

On a segment basis, U.S. retail sales increased 2.2% driven by the launch of Pepsico’s (NASDAQ: EPP) Beyond the cured meat. The gains offset weakness in the Foodservice channel attributed to issues with McDonald’s and Yum! Brands, but also weaknesses in Europe that are attributed to price cuts and currency headwinds. The bad news is that margins continue to shrink despite the company’s efforts to control costs. Adjusted EBITDA recorded a loss of $68.8 million or -46.8% of revenue and missed the consensus mark by a wide margin. Net income of $1.53 in adjusted losses also missed the target, by $0.39, and guidance was also reduced.

Full-year revenue forecast cut to $470-520 million, which assumes 1%-12% growth, but is down sharply from previous guidance and below’s consensus of $561 million. The company also announced a 4% reduction in its workforce, which will help the margin if not the productivity. The takeaway here is that the company is trying to reorganize itself so that it can capitalize on existing markets and could surprise in terms of results in the coming quarters.

The technical outlook: Beyond Meat may have hit rock bottom

Price action in Beyond Meat dipped three months ago with the previous earnings report, a report that foreshadowed second-quarter results but appears to have since bottomed out. Price action has rebounded and regained the upper part of the short-term 30-day EMA, although this support looks fragile at the moment. The post-exit action drove the price down near the $30 level and below the short-term EMA. If the buyers do not step in to support the price here, there is a good chance that the price action will fall to the bottom of a developing trading range near $21. If this level does not hold, the stock could take a much bigger drop. If the support holds at the $30 level, however, a retrace to the top of the range is likely.

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