Seneca Stock Gains on Strong Q3 Earnings and Margin Expansion

Core Viewpoint - Seneca Foods Corporation (SENEA) has shown strong financial performance in its recent earnings report, with significant increases in net sales and earnings, driven by favorable pricing and product mix despite lower sales volumes [2][3][11]. Financial Performance - For the third quarter of fiscal 2026, net sales reached $508.3 million, a 1.1% increase from $502.9 million in the same quarter last year [2]. - Net earnings surged to $44.8 million, or $6.48 per diluted share, compared to $14.7 million, or $2.10 per diluted share, a year ago [2]. - Operating income rose 133.7% to $59.9 million from $25.7 million in the prior-year quarter, with gross margin expanding to 16.4% from 9.8% [2][7]. Year-to-Date Performance - Year-to-date net sales for the nine months ended December 27, 2025, increased 2.7% to $1.27 billion from $1.23 billion in the prior-year period [3]. - Net earnings for the nine-month period climbed 120.1% to $89.4 million, or $12.89 per diluted share, from $40.6 million, or $5.81 per diluted share, in the prior year [3]. Segment Performance - The Vegetable business generated earnings before income taxes of $48.4 million, up 102.7% from $23.9 million a year ago [4]. - The Fruit and Snack segment contributed $6.3 million, a 62.3% increase from $3.9 million in the prior-year quarter [4]. - Revenue growth was primarily driven by pricing and product mix, with canned and frozen vegetables benefiting from an $8.9 million favorable impact from pricing, partially offset by a $2.5 million decline due to lower volumes [5]. Margin and Cost Management - Gross margin for the quarter improved to 16.4% from 9.8% in the prior-year period, aided by a LIFO credit of $2.6 million [7]. - On a nine-month basis, gross margin improved to 14.8% from 10.9%, supported by a $22.1 million LIFO credit [8]. - Selling, general and administrative expenses increased slightly to 4.6% of net sales from 4.5% a year earlier [9]. Cash Flow and Debt Management - Cash flow from operating activities for the first nine months totaled $114.2 million, down from $243.6 million in the prior-year period due to changes in working capital [10]. - The company reduced long-term debt to $242.7 million from $298.7 million a year earlier, indicating continued deleveraging [10]. Management Commentary - The CEO highlighted record sales and near-record FIFO profitability, attributing success to a strong holiday season and normalized costs following a poor harvest season [11]. Other Developments - During the nine months ended December 27, 2025, Seneca repurchased 86,142 shares of its Class A common stock for $8.7 million [13]. - The company entered into a receivables purchase agreement with a $50.0 million purchase limit to enhance liquidity and working capital flexibility [13].