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TreeHouse Foods (THS) Recalls Products on Salmonella Risk
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TreeHouse Foods, Inc.(THS - Free Report) recently recalled certain macaroni and cheese cup products containing cheddar cheese seasoning, after a supplier notified that the milk powder used in the seasoning might be contaminated with Salmonella. The products were sold nationwide through retail stores.
Salmonella is an organism that can cause diarrhea, fever, and abdominal cramps and can cause serious and sometimes fatal infections in children, elderly people, and others with weakened immune systems. Thankfully, no such case has been reported as of now. TreeHouse has urged consumers to destroy these infected products or return them for a full refund.
Of late, this Illinois-based food company has been facing weakness due to industry wide headwinds and gross margin pressure. Though the company exhibits a long-term earnings growth rate of 14.8% and a low beta of 0.41, instilling confidence about its growth, the stock has declined 6.3% year-to-date, significantly underperforming the Zacks categorized Food-Miscellaneous/ Diversified Market industry’s growth of 6.1%.
Notably, this Zacks Rank #4 (Sell) company has witnessed downward estimates revisions. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 declined 8.2% and 12.3%, respectively to $2.82 and $3.65.
The company, which operates as a food and beverage manufacturer in the United States and Canada, also reported weaker-than-expected third-quarter 2016 results. Further, management slashed its earnings view for 2016 due to the lower margin structure of the acquired Private Brands business from ConAgra Foods, Inc. (CAG - Free Report) (closed in Feb 2016). While sales surged year over year driven by the Private Brands acquisition and favorable volume/mix, earnings declined from the year-ago level due to lower gross margin related to the acquisition of the Private Brands business.
Many law firms are filing lawsuits against the company after Treehouse Foods reported weaker-than-expected third-quarter 2016 results and slashed its earnings view for the year. These firms are concerned that the company has possibly violated federal securities laws. They also believe that the company has been making misleading statements about its business operations. Further, they think that the company’s private label business and its acquisition strategies have been underperforming. Moreover, the company had overstated its full-year 2016 guidance. This has been adversely impacting the share price of the company since the past one month.
It is encouraging that the company is in the process of cutting costs and improving efficiency. However, lower gross margins are hurting profits. We note that the company has been struggling with lower margins related to its acquisition of Private Brands, a decision that resulted in plant closures, a lowered annual profit outlook and reshuffling of TreeHouse’s executive ranks.
Further, the company anticipates the overall food industry to face weakness and expects full year revenues for the industry to remain flat. Foreign exchange headwinds will also continue to challenge margins.
Mondelez International has an expected earnings growth rate of 13.12%. Further, it has delivered positive earnings surprises in three out of the trailing four quarters, leading to an average earnings surprise of 11.20%. On the other hand, Lancaster Colony has an expected earnings growth rate of 3.00%.
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TreeHouse Foods (THS) Recalls Products on Salmonella Risk
TreeHouse Foods, Inc.(THS - Free Report) recently recalled certain macaroni and cheese cup products containing cheddar cheese seasoning, after a supplier notified that the milk powder used in the seasoning might be contaminated with Salmonella. The products were sold nationwide through retail stores.
Salmonella is an organism that can cause diarrhea, fever, and abdominal cramps and can cause serious and sometimes fatal infections in children, elderly people, and others with weakened immune systems. Thankfully, no such case has been reported as of now. TreeHouse has urged consumers to destroy these infected products or return them for a full refund.
Of late, this Illinois-based food company has been facing weakness due to industry wide headwinds and gross margin pressure. Though the company exhibits a long-term earnings growth rate of 14.8% and a low beta of 0.41, instilling confidence about its growth, the stock has declined 6.3% year-to-date, significantly underperforming the Zacks categorized Food-Miscellaneous/ Diversified Market industry’s growth of 6.1%.
Notably, this Zacks Rank #4 (Sell) company has witnessed downward estimates revisions. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 declined 8.2% and 12.3%, respectively to $2.82 and $3.65.
TREEHOUSE FOODS Price, Consensus and EPS Surprise
TREEHOUSE FOODS Price, Consensus and EPS Surprise | TREEHOUSE FOODS Quote
The company, which operates as a food and beverage manufacturer in the United States and Canada, also reported weaker-than-expected third-quarter 2016 results. Further, management slashed its earnings view for 2016 due to the lower margin structure of the acquired Private Brands business from ConAgra Foods, Inc. (CAG - Free Report) (closed in Feb 2016). While sales surged year over year driven by the Private Brands acquisition and favorable volume/mix, earnings declined from the year-ago level due to lower gross margin related to the acquisition of the Private Brands business.
Many law firms are filing lawsuits against the company after Treehouse Foods reported weaker-than-expected third-quarter 2016 results and slashed its earnings view for the year. These firms are concerned that the company has possibly violated federal securities laws. They also believe that the company has been making misleading statements about its business operations. Further, they think that the company’s private label business and its acquisition strategies have been underperforming. Moreover, the company had overstated its full-year 2016 guidance. This has been adversely impacting the share price of the company since the past one month.
It is encouraging that the company is in the process of cutting costs and improving efficiency. However, lower gross margins are hurting profits. We note that the company has been struggling with lower margins related to its acquisition of Private Brands, a decision that resulted in plant closures, a lowered annual profit outlook and reshuffling of TreeHouse’s executive ranks.
Further, the company anticipates the overall food industry to face weakness and expects full year revenues for the industry to remain flat. Foreign exchange headwinds will also continue to challenge margins.
Stocks to Consider
Some better-ranked stocks in the broader consumer staples sector include Mondelez International, Inc. (MDLZ - Free Report) and Lancaster Colony Corporation (LANC - Free Report) . Both of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Mondelez International has an expected earnings growth rate of 13.12%. Further, it has delivered positive earnings surprises in three out of the trailing four quarters, leading to an average earnings surprise of 11.20%. On the other hand, Lancaster Colony has an expected earnings growth rate of 3.00%.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>