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TreeHouse Foods, Inc.(THS - Snapshot Report) reported fourth-quarter 2013 adjusted earnings of 98 cents per share, beating the Zacks Consensus Estimate of 91 cents by 7.7%. Adjusted earnings per share also surpassed the year-ago earnings of 86 cents by 14.0% backed by higher revenues in all its segments.

Adjusted earnings exclude expenses related to the restructuring of the company's soup operations, the closure of the Seaforth, Ontario, Canada salad dressing plant, integration costs related to the acquisition of Associated Brands (completed in Oct 2013) and write off of the company's investment in a pepper processing business.

Revenues and Margins

Total revenue increased 11.4% year over year to $660.3 million owing to acquisitions (Cains Foods and the aseptic cheese and pudding business from Associated Milk Producers Inc.) as well as higher volume and favorable mix. Revenues also beat the Zacks Consensus Estimate of $654.0 million by 1%.

Adjusted Earnings Before Interest, tax and Depreciation (EBITDA) increased 11.95% to $95.5 million backed by favorable sales mix and lower freight costs.

North American Retail Grocery Segment

Net revenue for the segment climbed 10.9% year over year to $479.1 million, driven by 0.9% increase in favorable volume/mix and 10.9% gains from the acquisition of Cains Foods. Strong performance in the single serve hot beverages, Mexican sauces, non-dairy powdered creamers and dressings boosted sales of the segment. Direct operating income margin in the reported quarter declined 100 basis points (bps) to 14.6% due to higher input costs and the inclusion of higher acquisition cost of Cains Foods.

Food Away From Home Segment

Net revenue for the segment climbed 12.0% year over year to $95.7 million owing to a 14.7% increase from acquisitions and pricing, partially offset by a 3.0% decrease in volume/mix. Direct operating income margin increased 180 bps and came in at 14.8% due to cost savings from operating efficiencies.

Industrial and Export Segment

Net revenue for the segment went up 13.1% year over year to $85.5 million primarily driven by a 12.3% increase from acquisitions and a 3.2% increase in volume/mix. Direct operating income margin in the fourth quarter also increased 150 bps to 20.6% due to favorable sales mix and cost savings from operating efficiencies.

Fiscal Results

For fiscal 2013 adjusted earnings of $3.19 per share beat the Zacks Consensus Estimate of $3.11 by 2.6%. Adjusted earnings per share also surpassed the year-ago earnings of $2.79 by 14.3%.

Total revenue increased 5.1% year over year to $2.3 million. Revenues were in line with the Zacks Consensus Estimate.

2014 Outlook

The company issued outlook for 2014. It expects sales growth of 9–10% in 2014 over fiscal 2013. The growth is backed by the full year impact of the Cains Foods and Associated Brands acquisitions. It expects adjusted earnings per share to grow by 10–3% to $3.50–$3.60. The guidance reflects the company’s initiatives to increase its operational efficiencies and cost reduction programs.

First-Quarter 2014 Outlook

In the first quarter of 2014, TreeHouse expects earnings per share in a range of 77 to 80 cents, versus 74 cents in the prior-year comparable period.

Our Take

TreeHouse presently carries a Zacks Rank #4 (Sell). Other food companies worth considering are Diamond Foods Inc. ((DMND - Analyst Report)), The Hain Celestial Group Inc. ((HAIN - Analyst Report)) and Kraft Foods Group Inc. (KRFT - Analyst Report). All these stocks carry a Zacks Rank #2 (Buy).

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