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TreeHouse Foods (THS) Q2 Earnings Meet Estimates, Stock Down
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TreeHouse Foods, Inc. (THS - Free Report) shares tumbled 7.8% on Aug 5, as the company lowered its 2021 guidance on posting soft second-quarter 2021 results. During the quarter, both top and bottom lines declined year over year and the former fell short of the Zacks Consensus Estimate. Management’s trimmed guidance was a result of the revenue shortfall in the second quarter as well as increased cost inflation among other factors.
The company continued to operate in an unprecedented landscape. It faced tough comparisons with the year-ago period’s pandemic-led demand surge. During the quarter, management also undertook actions to counter supply-chain hurdles, alongside executing pricing actions to counter inflation. Though the company saw soft consumer demand for private brands, it outpaced private label in most of the categories. TreeHouse Foods’ service levels remain sturdy and the company continues to keep its retail partners engaged. Management said that demand for private brands are likely to return to the historical growth levels once the environment normalizes and inflation converts to elevated prices.
Quarter in Detail
Adjusted earnings from continuing operations amounted to 26 cents per share that came in line with the Zacks Consensus Estimate. The bottom line declined considerably from 58 cents reported in the year-ago period.
TreeHouse Foods, Inc. Price, Consensus and EPS Surprise
Net sales of $1,003.2 million missed the consensus mark of $1,043 million and also fell 3.7% year over year. Organic sales slid 7.3% due to lower volume/mix (excluding buyouts and divestitures), somewhat made up by favorable pricing impacts. The company’s pricing actions to battle commodity and freight cost inflation have been working well.
Volume/mix fell 7.4% due to soft retail demand, which resulted from tough comparisons with the year-ago period’s burgeoning pandemic-induced demand. Volume/mix was also hurt by lower private label retail grocery demand in the second quarter of 2021, as macroeconomic factors like government stimulus and elevated disposable income turned consumer purchasing behavior toward branded retail grocery. This was partly compensated by higher demand for away-from-home food; distribution gains as well as sale of new products.
Apart from the above-mentioned factors, volume/mix associated with the sale of two in-store bakery facilities had an adverse impact, though it was more than compensated by gains from the inclusion of the business from the pasta acquisition (of 3.2%), as well as positive currency movements (of 0.7%). On Dec 11, 2020, TreeHouse concluded the buyout of the majority of Riviana Foods’ U.S.-branded pasta portfolio, as well as a manufacturing facility in St. Louis, Missouri. Apart from this, the company concluded the sale of its Ready-to-eat Cereal business to Post Holdings (POST - Free Report) in June 2021.
Gross margin came in at 16.6%, contracting 1.8 percentage points from the year-ago quarter’s figure. The decline was caused by lower volumes, inflated commodity costs, adverse channel mix and warehouse overflow storage expenses. This was partially negated by improved volume/mix related to the inclusion of the business from the pasta acquisition, as well as reduced pandemic-related costs.
Total operating expenses, as a percentage of sales, rose 0.3 percentage points to 16.2% as a result of integration costs related to the recent pasta business buyout. These were somewhat countered by reduced employee compensation expenses. Adjusted EBITDA from continuing operations slumped 23% to $96.7 million on account of soft volumes, adverse channel mix, commodity cost inflation and warehouse overflow storage costs. This was somewhat made up by positive volume/mix related to the pasta business buyout, as well as reduced employee compensation expenses.
Image Source: Zacks Investment Research
Segment Details
Meal Preparation: During the quarter, sales in the segment fell 3% year over year to $667.7 million. The downside was a result of lapping a major surge in pandemic-led retail grocery volume in the year-ago period, as well as a lower private label retail grocery demand during the reported quarter. This was somewhat made up by the inclusion of the business from the pasta acquisition, higher food away-from-home demand and distribution gains that surpassed distribution losses. However, this was partly countered by lower retail demand resulting. Organic sales in the segment dipped 8.6% year over year. Direct operating income (DOI) margin in the segment contracted 5.2 percentage points.
Snacking & Beverages: Net sales declined 5% to $374.2 million due to tough comparisons with year-ago period’s increased retail grocery volumes, partly compensated by distribution gains that surpassed distribution losses, sale of new products and pricing impacts. Segment organic sales also fell 5% year over year. DOI margin dipped 3.6 percentage points.
Other Financial Updates & Guidance
The company concluded the second quarter with cash and cash equivalents of $17.4 million, long-term debt (excluding operating lease liabilities) of $1,916.9 million and total shareholders’ equity of $1,858.5 million. During the first six months of 2021, cash used in operating activities of continuing operations amounted to $44 million. TreeHouse Foods made share buybacks worth $25 million in the quarter under review.
Management curtailed its 2021 sales and earnings guidance, on account of revenue shortfall in the second quarter, constant volatility in the macroeconomic landscape, further increase in commodity, freight, and packaging costs, as well as the timing lag associated with the impact of pricing to battle elevated input costs. That said, the company is committed toward speeding up its strategic journey to create competitive advantages in growth categories.
Management has lowered its guidance for 2021. For the year, net sales are now anticipated to be $4.20-$4.45 billion compared with $4.40-$4.60 billion expected earlier. The company posted net sales of $4.35 billion in 2020. Adjusted earnings from continuing operations are expected to be $2.00-$2.50 per share now, down from the previously guided range of $2.80-$3.20 per share. The Zacks Consensus Estimate for sales and earnings in 2021 is currently pegged at $4.47 billion and $2.82 per share, respectively.
For the third quarter of 2021, management expects net sales of $1.05-$1.16 billion and adjusted earnings per share from continuing operations of 45-60 cents.
We note that the Zacks Rank #3 (Hold) stock has declined 20.1% in the past three months compared with the industry’s drop of 8.4%.
J&J Snack Foods (JJSF - Free Report) sports a Zacks Rank #1 and its bottom line has outperformed the consensus mark by a wide margin in the last four quarters, on average.
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TreeHouse Foods (THS) Q2 Earnings Meet Estimates, Stock Down
TreeHouse Foods, Inc. (THS - Free Report) shares tumbled 7.8% on Aug 5, as the company lowered its 2021 guidance on posting soft second-quarter 2021 results. During the quarter, both top and bottom lines declined year over year and the former fell short of the Zacks Consensus Estimate. Management’s trimmed guidance was a result of the revenue shortfall in the second quarter as well as increased cost inflation among other factors.
The company continued to operate in an unprecedented landscape. It faced tough comparisons with the year-ago period’s pandemic-led demand surge. During the quarter, management also undertook actions to counter supply-chain hurdles, alongside executing pricing actions to counter inflation. Though the company saw soft consumer demand for private brands, it outpaced private label in most of the categories. TreeHouse Foods’ service levels remain sturdy and the company continues to keep its retail partners engaged. Management said that demand for private brands are likely to return to the historical growth levels once the environment normalizes and inflation converts to elevated prices.
Quarter in Detail
Adjusted earnings from continuing operations amounted to 26 cents per share that came in line with the Zacks Consensus Estimate. The bottom line declined considerably from 58 cents reported in the year-ago period.
TreeHouse Foods, Inc. Price, Consensus and EPS Surprise
TreeHouse Foods, Inc. price-consensus-eps-surprise-chart | TreeHouse Foods, Inc. Quote
Net sales of $1,003.2 million missed the consensus mark of $1,043 million and also fell 3.7% year over year. Organic sales slid 7.3% due to lower volume/mix (excluding buyouts and divestitures), somewhat made up by favorable pricing impacts. The company’s pricing actions to battle commodity and freight cost inflation have been working well.
Volume/mix fell 7.4% due to soft retail demand, which resulted from tough comparisons with the year-ago period’s burgeoning pandemic-induced demand. Volume/mix was also hurt by lower private label retail grocery demand in the second quarter of 2021, as macroeconomic factors like government stimulus and elevated disposable income turned consumer purchasing behavior toward branded retail grocery. This was partly compensated by higher demand for away-from-home food; distribution gains as well as sale of new products.
Apart from the above-mentioned factors, volume/mix associated with the sale of two in-store bakery facilities had an adverse impact, though it was more than compensated by gains from the inclusion of the business from the pasta acquisition (of 3.2%), as well as positive currency movements (of 0.7%). On Dec 11, 2020, TreeHouse concluded the buyout of the majority of Riviana Foods’ U.S.-branded pasta portfolio, as well as a manufacturing facility in St. Louis, Missouri. Apart from this, the company concluded the sale of its Ready-to-eat Cereal business to Post Holdings (POST - Free Report) in June 2021.
Gross margin came in at 16.6%, contracting 1.8 percentage points from the year-ago quarter’s figure. The decline was caused by lower volumes, inflated commodity costs, adverse channel mix and warehouse overflow storage expenses. This was partially negated by improved volume/mix related to the inclusion of the business from the pasta acquisition, as well as reduced pandemic-related costs.
Total operating expenses, as a percentage of sales, rose 0.3 percentage points to 16.2% as a result of integration costs related to the recent pasta business buyout. These were somewhat countered by reduced employee compensation expenses. Adjusted EBITDA from continuing operations slumped 23% to $96.7 million on account of soft volumes, adverse channel mix, commodity cost inflation and warehouse overflow storage costs. This was somewhat made up by positive volume/mix related to the pasta business buyout, as well as reduced employee compensation expenses.
Image Source: Zacks Investment Research
Segment Details
Meal Preparation: During the quarter, sales in the segment fell 3% year over year to $667.7 million. The downside was a result of lapping a major surge in pandemic-led retail grocery volume in the year-ago period, as well as a lower private label retail grocery demand during the reported quarter. This was somewhat made up by the inclusion of the business from the pasta acquisition, higher food away-from-home demand and distribution gains that surpassed distribution losses. However, this was partly countered by lower retail demand resulting. Organic sales in the segment dipped 8.6% year over year. Direct operating income (DOI) margin in the segment contracted 5.2 percentage points.
Snacking & Beverages: Net sales declined 5% to $374.2 million due to tough comparisons with year-ago period’s increased retail grocery volumes, partly compensated by distribution gains that surpassed distribution losses, sale of new products and pricing impacts. Segment organic sales also fell 5% year over year. DOI margin dipped 3.6 percentage points.
Other Financial Updates & Guidance
The company concluded the second quarter with cash and cash equivalents of $17.4 million, long-term debt (excluding operating lease liabilities) of $1,916.9 million and total shareholders’ equity of $1,858.5 million. During the first six months of 2021, cash used in operating activities of continuing operations amounted to $44 million. TreeHouse Foods made share buybacks worth $25 million in the quarter under review.
Management curtailed its 2021 sales and earnings guidance, on account of revenue shortfall in the second quarter, constant volatility in the macroeconomic landscape, further increase in commodity, freight, and packaging costs, as well as the timing lag associated with the impact of pricing to battle elevated input costs. That said, the company is committed toward speeding up its strategic journey to create competitive advantages in growth categories.
Management has lowered its guidance for 2021. For the year, net sales are now anticipated to be $4.20-$4.45 billion compared with $4.40-$4.60 billion expected earlier. The company posted net sales of $4.35 billion in 2020. Adjusted earnings from continuing operations are expected to be $2.00-$2.50 per share now, down from the previously guided range of $2.80-$3.20 per share. The Zacks Consensus Estimate for sales and earnings in 2021 is currently pegged at $4.47 billion and $2.82 per share, respectively.
For the third quarter of 2021, management expects net sales of $1.05-$1.16 billion and adjusted earnings per share from continuing operations of 45-60 cents.
We note that the Zacks Rank #3 (Hold) stock has declined 20.1% in the past three months compared with the industry’s drop of 8.4%.
Looking for Solid Food Stocks? Check These
Medifast (MED - Free Report) , which currently flaunts a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
J&J Snack Foods (JJSF - Free Report) sports a Zacks Rank #1 and its bottom line has outperformed the consensus mark by a wide margin in the last four quarters, on average.