3 Reasons To Avoid Tupperware After Its Dividend Cut And 27% Price Decline

Tupperware Brands Corporation (TUP) got walloped by the market January 30th when it released its 4th-quarter earnings. The earnings results included a huge miss on sales guidance as well as a hefty 60% cut to the existing dividend. As a result, the stock price took a sharp turn lower. Since January 30th, the stock has lost approximately 27%.

(Source: YCharts)
While investors may be tempted to jump into a beaten-down stock in anticipation of an eventual recovery, we need to examine why the stock fell on its face to begin with. If a stock suffers as a result of circumstances rather than business model erosion (an example would be when ConocoPhillips (COP) cut its dividend amid low oil prices in 2016), it could turn into a lucrative buying opportunity. When we look at Tupperware Brands, however, we fail to see any signs that a turnaround is imminent. For reasons outlined below, we remain bearish on the stock - despite a drastically lower share price.
The stock falling to a staggeringly low $27 per share has placed it at just 7X guided 2019 earnings. Even for a company that is projecting earnings growth at flat/slightly negative, there are not many companies available for such a cheap valuation. This illustrates the degree of intensity these stocks are sold off at when the dividend is cut. While this low valuation may entice investors, even as a value trade, there are numerous signs that a turnaround in the short term is a dicey proposition at best.
Red Flag #1:... Read more

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