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Here's Why Investors Are Eyeing Pinnacle Foods (PF)
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Pinnacle Foods Inc. is riding on its brand strength, strategic initiatives and meaningful acquisitions. This Zacks Rank #2 (Buy) stock has delivered a return of 27.6% in the past one year, thus outperforming both the Zacks categorized Food – Miscellaneous/Diversified industry and the broader sector. While the industry gained 0.2%, the Zacks categorized Consumer Staples sector increased 2.3%.
Positive Earnings Surprise Driving the Stock
Pinnacle Foods appears compelling from the earnings perspective. A glimpse of the past seven quarters shows that the company’s earnings have outperformed the Zacks Consensus Estimate in five quarters, while it met the estimate in the remaining two quarters. Its earnings have outpaced the Zacks Consensus Estimate in the past four quarters by an average of 1.7%.
Though earnings were in line with the Zacks Consensus Estimate in fourth-quarter 2016, the same grew year over year driven by double-digit sales growth and improved gross profit through effective productivity programs. Further, the company’s sales have surpassed the estimate, after five straight quarters of revenue miss and also surged 18.8% year over year. The upside was driven by a 17.3% benefit from the Boulder Brands acquisition and increased volume/mix of 2.0%, while being partially offset by 0.5% lower net price realization.
Following the results, the company raised its adjusted earnings guidance for 2017, which is estimated in the range of $2.55–$2.60 from $2.43–$2.48 per share. Consequently, the Zacks Consensus Estimate of $2.57 for 2017 and $2.74 for 2018 has increased 8 cents and 4 cents, respectively, over the last 60 days. Recently, management reaffirmed its earnings projection.
Sturdy Portfolio
Armed with a strong portfolio of brands, Pinnacle Foods actively manages its diverse portfolio of iconic food brands that enjoy strong household penetration in the United States. Also, the company has been innovating products to offer variety and maintain market share.
Alongside, the company has been carrying out various acquisitions over the years to grow its distribution network and customer base. Going into 2017, Pinnacle Foods is anticipated to benefit from the Boulder Brands acquisition, which gave it a new growth platform for refrigerated foods.
Moreover, this buyout is anticipated to contribute 1% to net sales and 3 cents per share to adjusted earnings in 2017. Pinnacle Foods is expected to realize benefits of scale in areas such as procurement, manufacturing and logistics. However, higher introductory costs related to innovation, increased consumer marketing investment, input cost inflation and currency headwinds are likely to hurt profits.
Nevertheless, we believe that these hurdles will be efficiently overcome by Pinnacle Foods, supported by the growth catalysts coupled with its productivity initiatives to generate savings and improve gross margins. Also, its Growth Score of ‘B’ with a long-term earnings growth rate of 8.3% boosts confidence in the stock.
Conagra Brands, with a long-term earnings growth rate of 8%, has increased 14.2% in the past one year.
Lancaster Colony, with a long-term earnings growth rate of 3%, has jumped 15.7% in the past one year.
Post Holdings, with a long-term earnings growth rate of 5%, rose 24.2% in the past one year.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>
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Here's Why Investors Are Eyeing Pinnacle Foods (PF)
Pinnacle Foods Inc. is riding on its brand strength, strategic initiatives and meaningful acquisitions. This Zacks Rank #2 (Buy) stock has delivered a return of 27.6% in the past one year, thus outperforming both the Zacks categorized Food – Miscellaneous/Diversified industry and the broader sector. While the industry gained 0.2%, the Zacks categorized Consumer Staples sector increased 2.3%.
Positive Earnings Surprise Driving the Stock
Pinnacle Foods appears compelling from the earnings perspective. A glimpse of the past seven quarters shows that the company’s earnings have outperformed the Zacks Consensus Estimate in five quarters, while it met the estimate in the remaining two quarters. Its earnings have outpaced the Zacks Consensus Estimate in the past four quarters by an average of 1.7%.
Though earnings were in line with the Zacks Consensus Estimate in fourth-quarter 2016, the same grew year over year driven by double-digit sales growth and improved gross profit through effective productivity programs. Further, the company’s sales have surpassed the estimate, after five straight quarters of revenue miss and also surged 18.8% year over year. The upside was driven by a 17.3% benefit from the Boulder Brands acquisition and increased volume/mix of 2.0%, while being partially offset by 0.5% lower net price realization.
Following the results, the company raised its adjusted earnings guidance for 2017, which is estimated in the range of $2.55–$2.60 from $2.43–$2.48 per share. Consequently, the Zacks Consensus Estimate of $2.57 for 2017 and $2.74 for 2018 has increased 8 cents and 4 cents, respectively, over the last 60 days. Recently, management reaffirmed its earnings projection.
Sturdy Portfolio
Armed with a strong portfolio of brands, Pinnacle Foods actively manages its diverse portfolio of iconic food brands that enjoy strong household penetration in the United States. Also, the company has been innovating products to offer variety and maintain market share.
Alongside, the company has been carrying out various acquisitions over the years to grow its distribution network and customer base. Going into 2017, Pinnacle Foods is anticipated to benefit from the Boulder Brands acquisition, which gave it a new growth platform for refrigerated foods.
Moreover, this buyout is anticipated to contribute 1% to net sales and 3 cents per share to adjusted earnings in 2017. Pinnacle Foods is expected to realize benefits of scale in areas such as procurement, manufacturing and logistics. However, higher introductory costs related to innovation, increased consumer marketing investment, input cost inflation and currency headwinds are likely to hurt profits.
Nevertheless, we believe that these hurdles will be efficiently overcome by Pinnacle Foods, supported by the growth catalysts coupled with its productivity initiatives to generate savings and improve gross margins. Also, its Growth Score of ‘B’ with a long-term earnings growth rate of 8.3% boosts confidence in the stock.
Other Stocks You May Consider
Other stocks worth considering in the same industry include Conagra Brands, Inc. (CAG - Free Report) , Lancaster Colony Corp. (LANC - Free Report) and Post Holdings, Inc. (POST - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Conagra Brands, with a long-term earnings growth rate of 8%, has increased 14.2% in the past one year.
Lancaster Colony, with a long-term earnings growth rate of 3%, has jumped 15.7% in the past one year.
Post Holdings, with a long-term earnings growth rate of 5%, rose 24.2% in the past one year.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>