MGP Ingredients reported a sharp year-over-year revenue decline in Q2, with management attributing performance to ongoing challenges in its Distilling Solutions segment and continued pressure on mid and value-tier spirit brands. While premium plus Branded Spirits like Penelope and El Mayor demonstrated resilience, the company faced soft demand and heightened competition at lower price points. CFO Brandon Gall emphasized that the difficult external environment—marked by inflation, higher interest rates, and cautious consumer behavior—remains a headwind. Despite these pressures, Gall noted, “Our teams are executing with purposeful focus, agility, and a targeted approach.”
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MGP Ingredients (MGPI) Q2 CY2025 Highlights:
- Revenue: $145.5 million vs analyst estimates of $140.4 million (23.7% year-on-year decline, 3.7% beat)
- Adjusted EPS: $0.97 vs analyst estimates of $0.66 (47.3% beat)
- Adjusted EBITDA: $35.89 million vs analyst estimates of $27.47 million (24.7% margin, 30.6% beat)
- The company reconfirmed its revenue guidance for the full year of $530 million at the midpoint
- Management reiterated its full-year Adjusted EPS guidance of $2.60 at the midpoint
- EBITDA guidance for the full year is $110 million at the midpoint, above analyst estimates of $107.9 million
- Operating Margin: 14%, down from 22.7% in the same quarter last year
- Market Capitalization: $590 million
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From MGP Ingredients’s Q2 Earnings Call
- William Bates Chappell (Truist Securities) asked about the status and visibility of new distillate contracts. CFO Brandon Gall explained most contracts are now confirmed or amended, providing strong visibility, but acknowledged that some customer purchasing pauses could persist into next year.
- Marc J. Torrente (Wells Fargo) inquired about branded spirits gross margin trends and the impact of reduced advertising. Gall noted current margin strength is driven by premium plus mix, but expects margin headwinds in the back half as value-tier pressures persist.
- Seamus Cassidy (TD Cowen) questioned the pace of industry inventory rationalization and competitive behavior. Gall responded that industry-wide production cuts are encouraging, but inventory corrections will take time and the environment will remain challenging into 2026.
- Sean Patrick McGowan (ROTH Capital Partners) asked about the distinction between paused and canceled contracts in Distilling Solutions. Gall clarified that paused purchases are considered temporary due to long-term relationships, and the company expects eventual resumption, though likely at lower volumes initially.
- Benjamin David Klieve (Lake Street Capital Markets) focused on Ingredient Solutions export dynamics and new customer contributions. Gall highlighted that lost export business, especially to Japan, has been offset by new North American customers, and ongoing commercialization at the ProTerra facility is a key growth lever.
Catalysts in Upcoming Quarters
In the coming quarters, our team will monitor (1) the trajectory of premium plus spirits growth, especially as new innovations and distribution partnerships roll out, (2) signs of stabilization or improvement in Distilling Solutions as customer purchasing patterns evolve, and (3) operational execution in Ingredient Solutions, particularly the ramp-up of the biofuel plant and new customer onboarding at the ProTerra facility. The impact of potential tariffs and cost controls will also remain central to our analysis.
MGP Ingredients currently trades at $28.05, down from $29.37 just before the earnings. Is there an opportunity in the stock?See for yourself in our full research report (it’s free).
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