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Pinnacle Foods, Inc. reported mixed fourth-quarter 2016 results. While earnings were in line with the Zacks Consensus Estimate, revenues beat the same. Shares of Pinnacle Foods were up 3.8% after market closed on Feb 23 as the company raised its earnings guidance for 2017.
A glimpse at the company’s share price reveals that the stock has notably outperformed the Zacks categorized Food – Miscellaneous/Diversified industry over the past one year. While the stock yielded 34.1%, the industry gained 9.7% in the said time frame.
Quarter in Detail
Adjusted earnings of 79 cents per share grew 12.9% from the year-ago period. The upside was supported by double-digit sales growth and improved gross profits through effective productivity programs. However, it was in line with the Zacks Consensus Estimate. In fact, in the last 12 straight quarters, earnings have beaten Zacks Consensus Estimate in the past 6 quarters and posted in-line results in the remaining six.
Net sales of Pinnacle Foods increased 18.8% to $858.5 million in the fourth quarter. The improvement was driven by a 17.3% benefit from the Boulder Brands acquisition (completed in Jan 2016), increased volume/mix of 2.0%, partially offset by 0.5% lower net price realization. Sales beat the Zacks Consensus Estimate of $852 million by 0.8%. In the past seven straight quarters, sales have beaten the Zacks Consensus Estimate in two quarters and lagged in the remaining five quarters.
Adjusted gross profit increased 19.5% to $267.7 million. Gross margin expanded 20 basis points (bps) to 31.2% on the back of improved productivity, the Boulder Brands acquisition, which offset the impact of input cost inflation and unfavorable product mix.
Adjusted earnings before interest and taxes (EBIT) went up 19.6% to $182.5 million, driven by higher sales and gross profit.
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise
Frozen:Segment sales grew 7.8% to $371.1 million in the fourth quarter, driven by increased volume/mix and Boulder Brand acquisition, partially offset by lower net price realization. The company witnessed continued strong performance of the Birds Eye franchise as well as robust business in Canada.
Adjusted EBIT for the segment rose 11.9% to $88.2 million, as net sales growth and productivity offset the negative impact from input cost inflation.
Grocery:Segment sales increased 7.1% to $298.4 million driven by Boulder Brands acquisition, partially offset by lower volume/mix and lower net price realization. The growth was driven by the newly added Smart Balance brand, sustained strength witnessed at Armour canned meat and improvement of Log Cabin syrup. These growth drivers were partially dampened by lower sales of Duncan Hines baking products and Nalley’s chili.
Adjusted EBIT for the segment increased 16.6% to $79.1 million, reflecting higher sales, productivity savings and the addition of Smart Balance brand. However, this was offset by input cost inflation.
Boulder Brands:Pinnacle completed the acquisition of Boulder Brands on Jan 15, 2016. As a result, Boulder is now a wholly-owned subsidiary of Pinnacle.
In fourth-quarter 2016, Boulder Brands contributed $97.4 million to net salescompared with $11.8 million in the prior-year period. This performance reflected the impact of the Boulder Brands buyout and increase in volume/mix of 21.5% for the gardein brand. Adjusted EBIT for the Boulder Brands segment totaled $12.7 million, compared with $1.2 million in the prior-year quarter.
Specialty Foods:Segment sales increased 4.1% to $91.5 million driven by Boulder Brands acquisition, partly offset by lower volume/mix and lower net price realization. However, the segment continued to be pressured by lower sales of private label canned meat, due to a heightened competitive bidding environment.
Adjusted EBIT decreased 2.1% to $10 million in the reported quarter.
Full-Year 2016 Results
In 2016, adjusted earnings were $2.15 per share, which were in line with the Zacks Consensus Estimate but grew 12.0% from the year-ago period. It also dovetailed with the upper end of the raised guidance of $2.14 to $2.15.
Net sales increased 17.8% to $3.13 billion in the year. The improvement was driven by Boulder Brands acquisition and higher net price realization, partially offset by currency headwinds. Sales also beat the Zacks Consensus Estimate of $3.12 billion.
Other Financial Aspects
Net cash provided by operating activities totaled $248 million in the fourth quarter of 2016, while capital expenditure at the end of Dec 25, 2016 stands at $101.01 million.
Full-Year 2017 Guidance
The company raised its guidance for adjusted earnings for 2017 to a range of $2.55 to $2.60 from $2.43 to $2.48 per share (issued on Jan 23).
The company now expects input cost inflation in the range of 2.5−3.0% for the year. Productivity savings are estimated in a range of 3.5−4% of costs, excluding Boulder Brands' synergies.
Capital expenditures for the full year are expected to be in the range of $120 million to $130 million.
Our Take
Overall, the company boasts of a strong brand portfolio and intends to continue investing in innovation to further differentiate its brands in the marketplace. It has also been pursuing various acquisitions over the years to enhance distribution network, customer base and long-term growth.
Moreover, Pinnacle Foods has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margins.
While ConAgra Foods has a long-term earnings growth rate of 8.0%, Ingredion has a long-term earnings growth rate of 11.0%. Post Holdings has a long-term earnings growth rate of 5.0%.
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Pinnacle Foods (PF) Meets Q4 Earnings Estimates, Lifts View
Pinnacle Foods, Inc. reported mixed fourth-quarter 2016 results. While earnings were in line with the Zacks Consensus Estimate, revenues beat the same. Shares of Pinnacle Foods were up 3.8% after market closed on Feb 23 as the company raised its earnings guidance for 2017.
A glimpse at the company’s share price reveals that the stock has notably outperformed the Zacks categorized Food – Miscellaneous/Diversified industry over the past one year. While the stock yielded 34.1%, the industry gained 9.7% in the said time frame.
Quarter in Detail
Adjusted earnings of 79 cents per share grew 12.9% from the year-ago period. The upside was supported by double-digit sales growth and improved gross profits through effective productivity programs. However, it was in line with the Zacks Consensus Estimate. In fact, in the last 12 straight quarters, earnings have beaten Zacks Consensus Estimate in the past 6 quarters and posted in-line results in the remaining six.
Net sales of Pinnacle Foods increased 18.8% to $858.5 million in the fourth quarter. The improvement was driven by a 17.3% benefit from the Boulder Brands acquisition (completed in Jan 2016), increased volume/mix of 2.0%, partially offset by 0.5% lower net price realization. Sales beat the Zacks Consensus Estimate of $852 million by 0.8%. In the past seven straight quarters, sales have beaten the Zacks Consensus Estimate in two quarters and lagged in the remaining five quarters.
Adjusted gross profit increased 19.5% to $267.7 million. Gross margin expanded 20 basis points (bps) to 31.2% on the back of improved productivity, the Boulder Brands acquisition, which offset the impact of input cost inflation and unfavorable product mix.
Adjusted earnings before interest and taxes (EBIT) went up 19.6% to $182.5 million, driven by higher sales and gross profit.
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise | Pinnacle Foods, Inc. Quote
Segment Details
Frozen:Segment sales grew 7.8% to $371.1 million in the fourth quarter, driven by increased volume/mix and Boulder Brand acquisition, partially offset by lower net price realization. The company witnessed continued strong performance of the Birds Eye franchise as well as robust business in Canada.
Adjusted EBIT for the segment rose 11.9% to $88.2 million, as net sales growth and productivity offset the negative impact from input cost inflation.
Grocery:Segment sales increased 7.1% to $298.4 million driven by Boulder Brands acquisition, partially offset by lower volume/mix and lower net price realization. The growth was driven by the newly added Smart Balance brand, sustained strength witnessed at Armour canned meat and improvement of Log Cabin syrup. These growth drivers were partially dampened by lower sales of Duncan Hines baking products and Nalley’s chili.
Adjusted EBIT for the segment increased 16.6% to $79.1 million, reflecting higher sales, productivity savings and the addition of Smart Balance brand. However, this was offset by input cost inflation.
Boulder Brands:Pinnacle completed the acquisition of Boulder Brands on Jan 15, 2016. As a result, Boulder is now a wholly-owned subsidiary of Pinnacle.
In fourth-quarter 2016, Boulder Brands contributed $97.4 million to net salescompared with $11.8 million in the prior-year period. This performance reflected the impact of the Boulder Brands buyout and increase in volume/mix of 21.5% for the gardein brand. Adjusted EBIT for the Boulder Brands segment totaled $12.7 million, compared with $1.2 million in the prior-year quarter.
Specialty Foods:Segment sales increased 4.1% to $91.5 million driven by Boulder Brands acquisition, partly offset by lower volume/mix and lower net price realization. However, the segment continued to be pressured by lower sales of private label canned meat, due to a heightened competitive bidding environment.
Adjusted EBIT decreased 2.1% to $10 million in the reported quarter.
Full-Year 2016 Results
In 2016, adjusted earnings were $2.15 per share, which were in line with the Zacks Consensus Estimate but grew 12.0% from the year-ago period. It also dovetailed with the upper end of the raised guidance of $2.14 to $2.15.
Net sales increased 17.8% to $3.13 billion in the year. The improvement was driven by Boulder Brands acquisition and higher net price realization, partially offset by currency headwinds. Sales also beat the Zacks Consensus Estimate of $3.12 billion.
Other Financial Aspects
Net cash provided by operating activities totaled $248 million in the fourth quarter of 2016, while capital expenditure at the end of Dec 25, 2016 stands at $101.01 million.
Full-Year 2017 Guidance
The company raised its guidance for adjusted earnings for 2017 to a range of $2.55 to $2.60 from $2.43 to $2.48 per share (issued on Jan 23).
The company now expects input cost inflation in the range of 2.5−3.0% for the year. Productivity savings are estimated in a range of 3.5−4% of costs, excluding Boulder Brands' synergies.
Capital expenditures for the full year are expected to be in the range of $120 million to $130 million.
Our Take
Overall, the company boasts of a strong brand portfolio and intends to continue investing in innovation to further differentiate its brands in the marketplace. It has also been pursuing various acquisitions over the years to enhance distribution network, customer base and long-term growth.
Moreover, Pinnacle Foods has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margins.
Zacks Rank and Other Stocks to Consider
Pinnacle Foods carries a Zacks Rank #2 (Buy).
Some other favorably placed food stocks in the industry include ConAgra Foods Inc. (CAG - Free Report) , Ingredion, Inc. (INGR - Free Report) and Post Holdings, Inc. (POST - Free Report) . All the three stocks have a Zacks Rank #2. You can seethe complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
While ConAgra Foods has a long-term earnings growth rate of 8.0%, Ingredion has a long-term earnings growth rate of 11.0%. Post Holdings has a long-term earnings growth rate of 5.0%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>