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TreeHouse Foods (THS) Gains on Retail Demand & Strong Brands
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Increased at-home dinning and cooking trends, amid the pandemic, have continued to add zeal to food companies such as the TreeHouse Foods, Inc. (THS - Free Report) . This has particularly been benefitting the company’s retail unit sales. Moreover, this well-known packaged foods, snacks and beverages company has been undertaking measures to broaden its portfolio.
Shares of the company have rallied 22.8% in the past three months compared with industry’s rise of 4.4%. That said, let’s take a closer look at the factors impacting this Zacks Rank #3 (Hold) company’s performance.
Strong Demand is an Upside
TreeHouse Foods is benefiting from rising demand due to coronavirus-led increased at-home consumption. During fourth-quarter 2020, the company’s net sales came in at $1,177.2 million, up 3.3% year over year. During the quarter, the company’s segments witnessed strong retail demand. Moreover, organic sales rose 4% owing to higher volume/mix, backed by elevated retail demand. Additionally, favorable pricing supported organic sales growth. Segment wise, the company’s meal preparation unit witnessed organic growth of 1.3% during the quarter. The segment gained from favorable volumes, mix and pricing impacts. The company’s snacks and beverages unit delivered organic growth of 8.1%, owing to better volumes and mix. Within the retail channel, sales increased 8%.
Efforts to Boost Portfolio Strength
TreeHouse Foods has always been focused on expanding its product offerings through acquisitions. In December 2020, the company concluded the buyout of the majority of Riviana Foods’ U.S.-branded pasta portfolio. During fourth-quarter earnings call, management highlighted that the company is on track with realizing synergies from this acquisition. Markedly, the acquisition contributed nearly $12 billion to organic revenues during the fourth quarter. The buyout also drove revenues in the meal preparation unit in the said quarter. Going ahead, management continues to expect that this acquisition is likely to contribute 20-30 cents in the first full year. Notably, the buyout has added regional brands, including Skinner, No Yolks, San Giorgio and P&R Procino-Rossi among others to TreeHouse Foods’ existing portfolio.
Earlier, TreeHouse Foods acquired Private Brands business — a leading manufacturer of private label refrigerated and shelf stable products in the bars, bakery, cereal, condiments, pasta and snacks categories. This acquisition has generated significant revenues through the inclusion of a range of brands. The company’s other acquisitions include PFF Capital Group, Inc. (“Protenergy”), Cains Foods, L.P., Associated Brands and Naturally Fresh, Inc.
Apart from these, the company is focusing on boosting organic foods, as consumers appear to be more interested in foods described as being “better for you,” which include fresh or freshly-prepared foods as well as natural, organic or specialty foods. The company expects sustained growth in these areas and continues to focus on consumer’s needs by developing new formulations, packaging and sizes.
Wrapping Up
The company is reeling under softness in the food-away-from home channel owing to increased social distancing and at-home consumption amid the pandemic. During the fourth quarter, the Food Away From Home business tumbled 27% and was a drag upon the company’s top line as well as organic sales. This channel is likely to remain weak for a major portion this year, given the continuation of stay-at-home trends. Moreover, incremental costs associated with the pandemic are a headwind.
Nevertheless, we expect TreeHouse Foods to tide through these challenges on the back of strength in its retail business as well as prudent strategies to boost portfolio. Moreover, its focus on exiting underperforming businesses and shifting focus toward areas with high growth potential has been yielding. Such well-chalked measures are likely to help maintain the company’s strong footing in the food space.
Pilgrims Pride Corporation (PPC - Free Report) has a long-term earnings growth rate of 24.1% and a Zacks Rank #2 (Buy).
The Hain Celestial Group, Inc. (HAIN - Free Report) , also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 26.7%, on average.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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TreeHouse Foods (THS) Gains on Retail Demand & Strong Brands
Increased at-home dinning and cooking trends, amid the pandemic, have continued to add zeal to food companies such as the TreeHouse Foods, Inc. (THS - Free Report) . This has particularly been benefitting the company’s retail unit sales. Moreover, this well-known packaged foods, snacks and beverages company has been undertaking measures to broaden its portfolio.
Shares of the company have rallied 22.8% in the past three months compared with industry’s rise of 4.4%. That said, let’s take a closer look at the factors impacting this Zacks Rank #3 (Hold) company’s performance.
Strong Demand is an Upside
TreeHouse Foods is benefiting from rising demand due to coronavirus-led increased at-home consumption. During fourth-quarter 2020, the company’s net sales came in at $1,177.2 million, up 3.3% year over year. During the quarter, the company’s segments witnessed strong retail demand. Moreover, organic sales rose 4% owing to higher volume/mix, backed by elevated retail demand. Additionally, favorable pricing supported organic sales growth. Segment wise, the company’s meal preparation unit witnessed organic growth of 1.3% during the quarter. The segment gained from favorable volumes, mix and pricing impacts. The company’s snacks and beverages unit delivered organic growth of 8.1%, owing to better volumes and mix. Within the retail channel, sales increased 8%.
Efforts to Boost Portfolio Strength
TreeHouse Foods has always been focused on expanding its product offerings through acquisitions. In December 2020, the company concluded the buyout of the majority of Riviana Foods’ U.S.-branded pasta portfolio. During fourth-quarter earnings call, management highlighted that the company is on track with realizing synergies from this acquisition. Markedly, the acquisition contributed nearly $12 billion to organic revenues during the fourth quarter. The buyout also drove revenues in the meal preparation unit in the said quarter. Going ahead, management continues to expect that this acquisition is likely to contribute 20-30 cents in the first full year. Notably, the buyout has added regional brands, including Skinner, No Yolks, San Giorgio and P&R Procino-Rossi among others to TreeHouse Foods’ existing portfolio.
Earlier, TreeHouse Foods acquired Private Brands business — a leading manufacturer of private label refrigerated and shelf stable products in the bars, bakery, cereal, condiments, pasta and snacks categories. This acquisition has generated significant revenues through the inclusion of a range of brands. The company’s other acquisitions include PFF Capital Group, Inc. (“Protenergy”), Cains Foods, L.P., Associated Brands and Naturally Fresh, Inc.
Apart from these, the company is focusing on boosting organic foods, as consumers appear to be more interested in foods described as being “better for you,” which include fresh or freshly-prepared foods as well as natural, organic or specialty foods. The company expects sustained growth in these areas and continues to focus on consumer’s needs by developing new formulations, packaging and sizes.
Wrapping Up
The company is reeling under softness in the food-away-from home channel owing to increased social distancing and at-home consumption amid the pandemic. During the fourth quarter, the Food Away From Home business tumbled 27% and was a drag upon the company’s top line as well as organic sales. This channel is likely to remain weak for a major portion this year, given the continuation of stay-at-home trends. Moreover, incremental costs associated with the pandemic are a headwind.
Nevertheless, we expect TreeHouse Foods to tide through these challenges on the back of strength in its retail business as well as prudent strategies to boost portfolio. Moreover, its focus on exiting underperforming businesses and shifting focus toward areas with high growth potential has been yielding. Such well-chalked measures are likely to help maintain the company’s strong footing in the food space.
Looking for Food Stocks? Check These
Sanderson Farms, Inc. , flaunting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 46.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Pilgrims Pride Corporation (PPC - Free Report) has a long-term earnings growth rate of 24.1% and a Zacks Rank #2 (Buy).
The Hain Celestial Group, Inc. (HAIN - Free Report) , also with a Zacks Rank #2, has a trailing four-quarter earnings surprise of 26.7%, on average.
Zacks Names “Single Best Pick to Double”
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
You know this company from its past glory days, but few would expect that it’s poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in a little more than 9 months and Nvidia which boomed +175.9% in one year.
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