BEDMINSTER, N.J. – Freshpet, which has factories in Bethlehem and Quakertown, opened Wednesday on Wall Street with its shares down $2.05 or 2.95%.
One might think the brand had just reported a bad third quarter, but the opposite is true. Just about every marker was up, except for net income, and that was due to a large, deferred tax adjustment from the year before.
What also makes Freshpet’s stock price decline puzzling is that its third quarter results blew away analysts’ estimates.
According to Zacks Equity research, the company’s quarterly earnings topped estimates by 65.71%. Over the past four quarters, Freshpet has beaten earnings estimates three times.
In addition, the company raised its revenue and earnings guidance for the year. So, who knows why the Street has turned negative?
Management Comments
“Our third quarter results demonstrate the strength and durability of the Freshpet business model,” Billy Cyr, Freshpet’s chief executive officer, said in a statement.
“In a challenging consumer and intense competitive environment, we delivered double-digit net sales growth, expanded margins and achieved our strongest Adjusted Gross Margin in more than seven years, while continuing to grow market share,” Cyr added.
“We are executing well against the priorities within our control and strengthening the competitive advantages that differentiate Freshpet,” he said, “including the quality of our products, our manufacturing scale and expertise, our expanding omnichannel presence and our growing franchise of highly loyal pet parents.”
Cyr went on to say he believes those advantages provide a strong foundation to deliver sustainable, profitable growth, capture a meaningful share of the long-term opportunity in fresh pet food and fulfill the company’s mission to help pets live longer, happier and healthier lives.
Freshpet 2026
3rd Quarter Results
In thousands except per share
30-Sep-26
30-Sep-25
Net Sales
317,840
288,848
Cost of Goods Sold
176,533
174,656
Gross Profit
141,307
114,192
Selling, General & Admin.
106,177
89,291
Income from Operations
35,130
24,901
Other (Expenses)/Income
-707
-1,196
Income Before Taxes
34,423
23,705
Income Taxes
4,711
-77,958
Stockholders Income
29,712
101,663
Total Comprehensive Income
29,677
101,577
Net Income Per Share
Basic
0.61
2.08
Diluted
0.58
1.86
Third Quarter 2026
Freshpet reported that volume gains of 10% helped net sales increase 10% to $317.8 million for the third quarter of 2026, compared to $288.8 million in the prior year period.
A key reason for the growth was gross profit of $141.3 million, or 44.5% as a percentage of net sales, for the third quarter, compared to $114.2 million, or 39.5% as a percentage of net sales, in the previous year period.
The increase was primarily due to improved leverage on plant expenses, reduced quality costs and lower input costs. Freshpet also noted adjusted gross profit was 50% of net sales, compared to 46% in the prior year period.
Selling, general and administrative expenses (SG&A) the company said were $106.2 million, or 33.4% as a percentage of net sales, for the third quarter of 2026, compared to 30.9% in the prior year period.
SG&A as a percentage of net sales increased primarily due to increased logistics costs and variable compensation accrual, partially offset by decreased media spend as a percentage of net sales. Adjusted SG&A for the third quarter was 29.6% of net sales, compared to 27.1% in the previous year period.
Freshpet reported net income was $29.7 million for the third quarter of 2026 compared to $101.7 million in the previous year period.
According to the company, the decrease in net income was due to a $77.9 million deferred income tax benefit recognized in the previous year period as a result of the release of the majority of the valuation allowance.
Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) was $64.5 million for the third quarter of 2026 compared to $54.6 million in the prior year period.
The increase in adjusted EBITDA was a result of increased adjusted gross profit, partially offset by higher adjusted SG&A, Freshpet noted.
First Nine Months of 2026
Freshpet reported net sales increased 12.8% to $921.1 million for the first nine months of 2026, compared to $816.8 million in the previous year period. The increase in net sales was primarily driven by volume gains of 13.3%, partially offset by unfavorable price/mix of 0.5%.
Gross profit was $390.7 million, or 42.4% as a percentage of net sales, for the first nine months of 2026, compared to $326.2 million, or 39.9% as a percentage of net sales, in the previous year period.
SG&A were $329.5 million, the company said, or 35.8% as a percentage of net sales, for the first nine months of 2026, compared to $295.0 million, or 36.1% as a percentage of net sales, in the prior year period.
Freshpet reported net income was $97.7 million for the first nine months of 2026 compared to $105.3 million in the previous year period.
Also, the company said adjusted EBITDA was $154.6 million for the first nine months of 2026 compared to $134.5 million in the previous year period.
Photo courtesy of J.G. Petrucci Company / BGO Cold Chain
Balance Sheet
As of September 30, 2026, the company reported cash and cash equivalents of $345.9 million with $399 million of debt outstanding.
Cash and cash equivalents increased $67.9 million compared to $278 million as of December 31, 2025, primarily as a result of the $100 million of cash proceeds received from the sale of its equity investment and $65.3 million of Free Cash Flow, partially offset by $102.3 million of share repurchases.
For the nine months ended September 30, 2026, Freshpet claimed cash from operations was $145.5 million, an increase of $40.1 million compared to the prior year period.
Outlook
For full year 2026, the company said it is updating its guidance and now expects the following:
Net sales growth in the range of 12% to 13%, compared to growth of 10% to 12% in the previous guidance;
Adjusted EBITDA in the range of $215 million to $220 million, compared to $210 million to $220 million in the previous guidance; and
Positive Free Cash Flow with capital expenditures between $125 to $150 million, compared to ~$150 million in the previous guidance.
In addition, the company noted it is reiterating its long-term guidance. For full year 2027, the Company expects:
Net sales well in excess of the category growth rate, unchanged;
Adjusted gross margin of at least 49%, unchanged; and
Adjusted EBITDA margin in the range of 20% to 22%, unchanged.
Freshpet, Inc. is an American pet food company. Its cat food and dog food products are marketed as fresh and need to be kept refrigerated. It is listed on the Nasdaq exchange with the ticker symbol FRPT.
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