TreeHouse Foods, Inc. ( THS Quick Quote THS - Free Report) appears to be in good shape, with its shares up 28.1% in the past three months against the industry’s decline of 7.7%. The company has been benefiting from its robust pricing actions amid the rising cost inflation. Also, a focus on expanding product offerings has been working well. For 2022, TreeHouse Foods’ net sales are anticipated to increase a minimum of 11% year over year. Net sales for 2022 are expected to mainly benefit from pricing actions, offset by volume constraints stemming from labor shortages and supply-chain disruptions. Adjusted EBITDA is estimated in the range of $385-$415 million for 2022, indicating growth of 5% at the midpoint. The company expects the majority of earnings growth to come in the second half of 2022. Let’s delve deeper into the company’s drivers. Image Source: Zacks Investment Research Upsides
TreeHouse Foods has been gaining from its efficient pricing efforts. In the first quarter of 2022, THS’ top line increased year over year, with pricing being the main driver. Net sales of $1,141 million surpassed the consensus mark of $1,085 million and advanced 7.9% year over year. Pricing increased 11.7%. Organic sales grew 8%. Better pricing was the main driver, which helped the company counter commodity and freight cost inflation. Pricing actions also partly aided the company’s gross margin in the reported quarter.
The company intends to continue undertaking pricing actions, which are expected to boost net sales in 2022. Apart from this, the company expects to benefit from further actions to mitigate the impacts of labor and supply-chain disruptions, which will aid margin enhancement as 2022 progresses. TreeHouse Foods is also benefiting from the sturdy demand for its private label products, which keeps it well-placed for growth. In the first quarter, the company outpaced the broader private label market in eight out of its 10 biggest categories.
TreeHouse Foods has always been focused on expanding its product offerings through acquisitions. In December 2020, the company had concluded the buyout of the majority of Riviana Foods’ U.S. branded pasta portfolio. In February 2016, TreeHouse Foods had acquired the Private Brands business for $2.7 billion. The Private Brands business is a leading manufacturer of private label refrigerated and shelf-stable products in the bars, bakery, cereal, condiments, pasta and snack categories. The company’s other acquisitions include PFF Capital Group, Inc. (“Protenergy”), Cains Foods, L.P., Associated Brands and Naturally Fresh, Inc.
Meanwhile, THS remains committed to exiting underperforming businesses and shifting its focus on areas with high growth potential. To this end, it concluded the sale of its Ready-to-eat Cereal business to Post Holdings in June 2021. Before this, the company had completed the divestiture of the Snack business to Atlas Holdings on Aug 1, 2019. Further, TreeHouse Foods had offloaded two of its in-store bakery facilities to Rich Products Corporation in April 2020. Apart from this, the company is also focused on cost control and continuous improvement efforts to drive savings. These aspects are likely to continue working well for this Zacks Rank #2 (Buy) company. Other Solid Staple Stocks
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