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TreeHouse Foods Continues to Face Headwinds: Time to Sell?
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TreeHouse Foods, Inc. (THS - Free Report) 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 8.5% year-to-date, significantly underperforming the Zacks categorized Food-Miscellaneous/Diversified Market industry’s growth of 6.5%.
Notably, this Illinois-based food company has witnessed downward estimates revisions. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 declined 8.1% 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, reported weaker-than-expected third-quarter 2016 results. Further, management slashed its earnings view for 2016 due to the lower margin structure of the Private Brands business acquired from ConAgra Foods, Inc. (CAG - Free Report) (acquisition 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, this Zacks Rank #4 (Sell) 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.
Ingredion has an expected earnings growth rate of 11.0%. Further, it has delivered positive earnings surprises in three out of the trailing four quarters, leading to an average earnings surprise of 10.47%. On the other hand, Lancaster Colony has an expected earnings growth rate of 3.00%.
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TreeHouse Foods Continues to Face Headwinds: Time to Sell?
TreeHouse Foods, Inc. (THS - Free Report) 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 8.5% year-to-date, significantly underperforming the Zacks categorized Food-Miscellaneous/Diversified Market industry’s growth of 6.5%.
Notably, this Illinois-based food company has witnessed downward estimates revisions. Over the past 60 days, the Zacks Consensus Estimate for 2016 and 2017 declined 8.1% 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, reported weaker-than-expected third-quarter 2016 results. Further, management slashed its earnings view for 2016 due to the lower margin structure of the Private Brands business acquired from ConAgra Foods, Inc. (CAG - Free Report) (acquisition 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, this Zacks Rank #4 (Sell) 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.
TREEHOUSE FOODS Price and Consensus
TREEHOUSE FOODS Price and Consensus | TREEHOUSE FOODS Quote
Stocks to Consider
Some better-ranked stocks in the broader consumer staples sector include Ingredion, Inc. (INGR - 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.
Ingredion has an expected earnings growth rate of 11.0%. Further, it has delivered positive earnings surprises in three out of the trailing four quarters, leading to an average earnings surprise of 10.47%. On the other hand, Lancaster Colony has an expected earnings growth rate of 3.00%.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 ""Strong Buy"" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 ""Strong Sells"" and other private research. See these stocks free >>