While other stocks have made tremendous gains in the past four years, the share price of Maple Leaf Foods (TSX: MFI) is relatively at the same level it was at the beginning of 2016. Despite reaching an all-time high in December of 2017, the stock has recently been under pressure since its latest earnings release.
Last week, the company gained attention when CEO Michael McCain made headlines with his controversial tweets regarding the unintentional Iranian missile strike of Ukrainian International Airlines flight 752, which killed 176 people.
CEO wades into controversy
While most CEOs consider a public political statement regarding such a tragedy off limits, the CEO of Maple Leaf Foods voiced his thoughts publicly. Using the company’s Twitter feed, McCain expressed outrage over the deaths, saying “Canadians needlessly lost their lives in the crossfire.”
In a series of four tweets, McCain went on to bash U.S. president Donald Trump. McCain wanted the world to know he was “livid,” as he and the company mourned the deaths of a colleague’s wife and son who were on board the flight.
Almost immediately after the four tweets, the internet erupted. The morning after the comments were made, the hashtag #BoycottMapleLeafFoods was trending on Twitter. One financial analyst admitted he “had never seen another CEO in Canada doing something like this ever before.”
Thus far, the comments from the CEO have caused little effect on Maple Leaf stock. As of this writing, the stock is trading at $25.18, although the stock briefly fell under $25 the morning after the CEO’s comments.
Stock under pressure
The company’s stock has been under pressure since its last quarterly earnings report on October 30, 2019. Shares of the stock fell over 13.5%, as the company reported a decline in earnings of 89.7%, even as sales increased 13.8% year over year. Maple Leaf reported sales of $995.8 million with adjusted earnings of $0.03.
Maple Leaf attributed the earnings decline to a recent pork ban in China, after the country discovered several fake export certificates for these products. In addition, hog prices worldwide showed volatility in 2019 due to an outbreak of the African Swine Fever virus in Asia.
The company also incurred nearly $50 million in extra expenses for the first nine months of 2019 relative to the previous year, primarily driven by the implementation of the company’s plant-based protein strategy. Maple Leaf is attempting to drive sales and secure market share in the rapidly growing trend toward meatless protein. The extra expenses included significant investments in advertising, promotion, and marketing to support the company’s new plant-based product launches.
The bottom line
Maple Leaf Foods has a long way to go to win back disappointed investors who have held the stock for the past several years. New investors are advised to approach this stock with a wait-and-see attitude until the company produces a few good quarters.
Maple Leaf is scheduled to release its fourth-quarter results on February 27.
