What Happened:

Shares of specialty food company Lancaster Colony (NASDAQ:LANC) fell 11% in the morning session after the company reported second quarter earnings results. Revenue and EPS both missed, but this was due to the impact of Lancaster Colony's tactical decision to exit perimeter-of-the-store bakery product lines this past March. The company's qualitative outlook was also encouraging. Lancaster Colony said that for the full year, Retail segment sales will continue to benefit from volume growth led by their licensing program. Also, the company announced that its partnership with Texas Roadhouse has expanded beyond steak sauces to include their popular dinner rolls, which we introduced with a regional pilot test in June. Overall, this was a challenging quarter for the company.

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What is the market telling us:

Lancaster Colony’s shares are not very volatile than the market average and over the last year have had only 3 moves greater than 5%. Moves this big are very rare for Lancaster Colony and that is indicating to us that this news had a significant impact on the market’s perception of the business.

The biggest move we wrote about over the last year was 7 months ago, when the stock gained 14.3% on the news that the company reported second-quarter earnings results that beat on the gross and operating margin lines, leading to a nice EPS beat.

On the other hand, its revenue unfortunately missed analysts' expectations. The retail segment grew 2.0% due to volume gains, with management guiding for the segment to continue to benefit from "our expanding licensing program." In the food service segment, the company expects "sustained volume growth from select quick-service restaurant customers." though it expects headwinds due to deflationary pricing. Overall, the results were mixed, though profitability metrics improved significantly in the quarter.

Lancaster Colony is up 5.1% since the beginning of the year, but at $174.94 per share it is still trading 15.7% below its 52-week high of $207.63 from March 2024. Investors who bought $1,000 worth of Lancaster Colony’s shares 5 years ago would now be looking at an investment worth $1,124.

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