Weber Inc. and Traeger Inc., two companies that sell grills and barbecue equipment, are taking advantage of this summer outdoor cooking season to go public, but a comparative analysis of the two shows that one is on a stronger financial footing.
RapidRatings, a risk and financial analysis company that examines the financial health of thousands of companies, took a close look at their financials and found Weber /zigman2/quotes/203784864/composite WEBR -2.12% had a far higher financial health rating than Traeger /zigman2/quotes/228383287/composite COOK -0.95% at 75 out of a possible 100, compared with Traeger’s 44.
The FHR rating measures short-term probability of default. It puts Weber in the “strong” category and Traeger in the “medium risk” one.
Still, James Gellert, RapidRatings chief executive, said even with that gap in FHR ratings, both companies have had a relatively good year.
Their Core Health Score, which evaluates efficiencies in the business over a two- to three-year perspective, stands at 53 for Traeger — the medium health category — and 73 for Weber — the strong health category.
“With the combination of an optimistic recovery-swing, a summer high of consumer spending, and the traditional season of outdoor cooking in full effect—the backdrop is right to make their debut on the public stage,” Gellert wrote in his analysis.
Weber has a financial edge on Traeger, despite some recent improvements, he said.
Traeger has dug itself out of a weak position in 2019, when it had an FHR of 27, placing it in the high risk category. That rating rose to 37 in 2020 before rising about 40 this year.
Weber, in contrast, has been in the medium risk category through the pandemic with an FHR of 57 in 2020. It’s currently “in a category of companies (low risk) that have not only fared well but benefited,” said Gellert.
Both companies are “right-side up” in terms of debt-to-equity ratios, but Weber’s $380 million cash-on-hand far exceeds Traeger with $17 million.
“If current trends persist it would be logical to expect that Weber will face lowdefault risk this coming year while prospects for enhancing efficiency and competitiveness are excellent over the medium-term; thus, the outlook is positive,” wrote RapidRatings in a report on Weber.
Weber is cooking in more than half of U.S. households
Weber stock made its debut on Thursday, jumping 21% when shares began trading after cutting its IPO by more than 50%. The company had planned to offer 46.9 million shares of common stock, priced at $15 to $17 per share. Weber said overnight that it raised $250 million, as it sold 17.86 million shares in the IPO, which priced at $14 a share, implying a fully diluted valuation of roughly $5 billion.
Weber is trading on the New York Stock Exchange under the ticker “WEBR.” Proceeds will be used to pay debt and for general corporate purposes.
Goldman Sachs, BofA Securities and JP Morgan are lead underwriters in a syndicate of 12 banks.
Founded by the inventor of the charcoal grill George Stephen, Sr. nearly 70 years ago, Weber now also offers gas grills, smokers and other items across 78 countries.
In 2020, the Illinois-based company introduced “Weber Connect,” a connected grilling platform that includes grilling technology, a mobile app and a cloud-based infrastructure that grill owners can use for smartphone-enabled cooking. In 2018, Weber took a minority investment in June Life, the company that powers this connected experience.
Retailers including Costco Wholesale Corp. /zigman2/quotes/201191698/composite COST +1.00% , Home Depot Inc. /zigman2/quotes/208081807/composite HD +0.38% , Lowe’s Cos. /zigman2/quotes/205563664/composite LOW +0.59% , and Walmart Inc. /zigman2/quotes/207374728/composite WMT +1.04% are among the thousands of sellers of Weber merchandise, including Weber’s own shops and e-commerce site.
Weber is profitable, with net income totaling $88.9 million in fiscal 2020 to end September, up from $50.1 million the year earlier. The compound annual growth rate (CAGR) between 1980 and 2021 was 10%.
Sales rose to $1.525 billion from $1.296 billion in 2019. More than half (58%) of revenue was generated in the Americas with a “significant” manufacturing operation in the U.S. and 22 global distribution facilities, according to the prospectus . A new facility in Poland is expected to open in the fourth quarter of fiscal 2021. A portion of the company’s workforce is unionized.
As of June 30, the only borrowings Weber had was $6.4 million in undrawn letters of credit. Long-term debt as of March 30, 2021 was $1.21 billion.
In April, Weber-Stephen Products LLC, the company under which Weber does business until the offering, acquired R. McDonald Co. for $29 million in cash and $14 million in equity. R. McDonald Co. will be the exclusive Weber seller in Australia and New Zealand.
After the public offering, Weber will be a holding company that will depend on distributions from Weber HoldCo LLC to pay dividends.
Chris Scherzinger has been chief executive and a director of Weber-Stephen Products LLC since April 2018. He has previously held executive roles at Jarden Corp. and Newell Brands Inc. /zigman2/quotes/209507510/composite NWL -2.62%
William Horton has been chief financial officer since June 2018. He, too, had held previous roles at Jarden and Newell.