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TreeHouse Foods (THS) Buys New Pasta Brands, Boosts Portfolio
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TreeHouse Foods, Inc. (THS - Free Report) has been focused on bolstering its portfolio through meaningful buyouts. Moving on these lines, the company concluded its previously announced buyout of the majority of Riviana Foods’ U.S. branded pasta portfolio, for a cash price of $242.5 million. Notably, Riviana Foods is a subsidiary of Ebro.
This acquisition is likely to contribute 20-30 cents in the first full year. Further, management expects normalized revenues of the acquired business in a range of $170-180 million, while normalized EBITDA is envisioned in a band of $25-$30 million, before including synergies. Apart from this, TreeHouse Foods anticipates cash tax benefits of roughly $40 million, on a net present value basis.
The buyout will add regional brands, including Skinner, No Yolks, San Giorgio, P&R Procino-Rossi, Prince and Light 'n Fluffy, American Beauty, Creamette, Mrs. Weiss', New Mill, and Wacky Mac, to TreeHouse Foods’ existing portfolio. The deal also includes the St. Louis manufacturing facility, with a workforce of about 90 people. Markedly, this acquisition is likely to bolster the company’s Meals Preparation segment, of which pasta is a significant and profitable category. Sales in the segment fell 2.1% year over year to $642.7 million in the last reported quarter due to distribution losses and lower food-away-from-home demand.
Nonetheless, TreeHouse Foods has been otherwise benefiting from elevated retail demand due to the coronavirus-led stockpiling and increased at-home consumption. The company’s retail business grew 7% in third-quarter 2020 and helped counter distribution loss impacts and weak demand in the food-away-from-home channel. This along with an improved gross margin and lower operating costs aided the company’s bottom line, which advanced 29% year over year to 71 cents, beating the Zacks Consensus Estimate of 61 cents.
The company remains optimistic about its prospects for the private-label space and sustained momentum for at-home food consumption. The company expects eat-at-home trends and elevated grocery demand to continue. Encouragingly, management updated its 2020 net sales view when it reported third-quarter results. Net sales are now anticipated to be $4.2-$4.4 billion compared with its previously guided range of $4.10-$4.40 billion. Adjusted earnings from continuing operations are expected to be $2.65-$2.75 per share compared with $2.55-$2.75 forecasted earlier.
Wrapping Up
TreeHouse Foods has long been gaining from its focus on refining the portfolio through prudent buyouts as well as meaningful divestitures. Earlier, the company acquired the Private Brands business from Conagra Brands (CAG - Free Report) in February 2016. TreeHouse Foods’ other acquisitions include Protenergy, Cains Foods and Associated Brands, to name a few. That said, we believe that the acquisition of the majority of Riviana Foods’ U.S. branded pasta business is likely to augment TreeHouse Foods’ portfolio and help it meet the surging demand for packaged food products amid the pandemic-led higher at-home consumption.
Shares of this Zacks Rank #3 (Hold) company have gained 10.6% in the past three months compared with the industry’s growth of 4.5%.
Hain Celestial (HAIN - Free Report) has a Zacks Rank #2 and a trailing four-quarter earnings surprise of 24.6%, on average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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TreeHouse Foods (THS) Buys New Pasta Brands, Boosts Portfolio
TreeHouse Foods, Inc. (THS - Free Report) has been focused on bolstering its portfolio through meaningful buyouts. Moving on these lines, the company concluded its previously announced buyout of the majority of Riviana Foods’ U.S. branded pasta portfolio, for a cash price of $242.5 million. Notably, Riviana Foods is a subsidiary of Ebro.
This acquisition is likely to contribute 20-30 cents in the first full year. Further, management expects normalized revenues of the acquired business in a range of $170-180 million, while normalized EBITDA is envisioned in a band of $25-$30 million, before including synergies. Apart from this, TreeHouse Foods anticipates cash tax benefits of roughly $40 million, on a net present value basis.
The buyout will add regional brands, including Skinner, No Yolks, San Giorgio, P&R Procino-Rossi, Prince and Light 'n Fluffy, American Beauty, Creamette, Mrs. Weiss', New Mill, and Wacky Mac, to TreeHouse Foods’ existing portfolio. The deal also includes the St. Louis manufacturing facility, with a workforce of about 90 people. Markedly, this acquisition is likely to bolster the company’s Meals Preparation segment, of which pasta is a significant and profitable category. Sales in the segment fell 2.1% year over year to $642.7 million in the last reported quarter due to distribution losses and lower food-away-from-home demand.
Nonetheless, TreeHouse Foods has been otherwise benefiting from elevated retail demand due to the coronavirus-led stockpiling and increased at-home consumption. The company’s retail business grew 7% in third-quarter 2020 and helped counter distribution loss impacts and weak demand in the food-away-from-home channel. This along with an improved gross margin and lower operating costs aided the company’s bottom line, which advanced 29% year over year to 71 cents, beating the Zacks Consensus Estimate of 61 cents.
The company remains optimistic about its prospects for the private-label space and sustained momentum for at-home food consumption. The company expects eat-at-home trends and elevated grocery demand to continue. Encouragingly, management updated its 2020 net sales view when it reported third-quarter results. Net sales are now anticipated to be $4.2-$4.4 billion compared with its previously guided range of $4.10-$4.40 billion. Adjusted earnings from continuing operations are expected to be $2.65-$2.75 per share compared with $2.55-$2.75 forecasted earlier.
Wrapping Up
TreeHouse Foods has long been gaining from its focus on refining the portfolio through prudent buyouts as well as meaningful divestitures. Earlier, the company acquired the Private Brands business from Conagra Brands (CAG - Free Report) in February 2016. TreeHouse Foods’ other acquisitions include Protenergy, Cains Foods and Associated Brands, to name a few. That said, we believe that the acquisition of the majority of Riviana Foods’ U.S. branded pasta business is likely to augment TreeHouse Foods’ portfolio and help it meet the surging demand for packaged food products amid the pandemic-led higher at-home consumption.
Shares of this Zacks Rank #3 (Hold) company have gained 10.6% in the past three months compared with the industry’s growth of 4.5%.
Food Stocks Worth a Watch
B&G Foods (BGS - Free Report) has a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 9.3%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hain Celestial (HAIN - Free Report) has a Zacks Rank #2 and a trailing four-quarter earnings surprise of 24.6%, on average.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>