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TreeHouse Foods (THS) Banks on Pricing to Counter Inflation
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TreeHouse Foods, Inc. (THS - Free Report) has been benefiting from pricing actions to counter rising inflation. The effects of the same were seen in the fourth quarter of fiscal 2022 results, wherein the top and the bottom lines increased year over year. The company also benefits from its focus on portfolio refinement.
Pricing Action: Key Factor
Treehouse Foods is benefiting from its cost-effective pricing efforts. The company's top line increased year over year in the fourth quarter of fiscal 2022, with pricing being the primary driver. In the said period, net sales of $996.2 million increased from $816.3 million reported in the year-ago period.
Pricing increased by 24.6%, assisting 22.4% growth in organic sales. Better pricing was the primary driver, which was helping the company in combating commodity inflation. Management anticipates that its pricing actions will boost sales and adjusted EBITDA growth in fiscal 2023. Pricing actions are expected to have a significant impact during the first half of the year.
Image Source: Zacks Investment Research
What Else is Driving Growth
TreeHouse Foods has always prioritized increasing the variety of products it offers through acquisitions. The company completed the acquisition of the majority of Riviana Foods' U.S. branded pasta portfolio in December 2020.
In February 2016, TreeHouse Foods paid $2.7 billion to acquire the Private Brands division. The Private Brands Business is the leading manufacturer of private label shelf stable. It refrigerated goods in the categories of bars, bakery, cereal, condiments, pasta and snacks. The addition of Private Brands increased revenues and assisted the company in reducing debt.
On the flip side, the company remains committed toward exiting underperforming businesses and shifting focus to areas with high growth potential. On Oct 3, 2022, TreeHouse Foods concluded the sale of a significant portion of its Meal Preparation business, which included pasta, pourable and spoonable dressing, preserves, red sauces, syrup, dry blends and baking, dry dinners, pie filling, pita chips and other sauces. With the divestiture, TreeHouse Foods is now well-positioned to take advantage of positive demand trends and drive growth in its higher-margin private label beverage and snacking categories.
These portfolio reshaping initiatives show how the company is concentrating on markets with greater growth potential, alongside strengthening its balance sheet.
Notably, the company provided a compelling fiscal 2023 guidance on its last earnings call. THS expects fiscal 2023 net sales growth in the range of 6-8% year over year, led by pricing. Adjusted EBITDA from continuing operations for the aforementioned period is anticipated to be in the $345-$365 million range, suggesting growth of 24% year over year at the midpoint.
Wrapping up
TreeHouse Foods has been battling escalated costs for a while now. In the fourth quarter of 2022, although the gross margin expanded year over year, it continued to bear the brunt of additional costs associated with labor and supply-chain disruptions along with warehouse capacity constraints. Management also expects that the macro environmental uncertainty will prevail in fiscal 2023. However, the company is on track to recover increased input costs via targeted pricing actions.
Shares of this Zacks Rank #3 (Hold) company have rallied 10.3% in the past three months compared with the industry’s growth of 2.6%.
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
Kimberly-Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial year sales and earnings suggests growth of 1.7% and 5.2%, respectively, from the year-ago reported numbers.
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TreeHouse Foods (THS) Banks on Pricing to Counter Inflation
TreeHouse Foods, Inc. (THS - Free Report) has been benefiting from pricing actions to counter rising inflation. The effects of the same were seen in the fourth quarter of fiscal 2022 results, wherein the top and the bottom lines increased year over year. The company also benefits from its focus on portfolio refinement.
Pricing Action: Key Factor
Treehouse Foods is benefiting from its cost-effective pricing efforts. The company's top line increased year over year in the fourth quarter of fiscal 2022, with pricing being the primary driver. In the said period, net sales of $996.2 million increased from $816.3 million reported in the year-ago period.
Pricing increased by 24.6%, assisting 22.4% growth in organic sales. Better pricing was the primary driver, which was helping the company in combating commodity inflation. Management anticipates that its pricing actions will boost sales and adjusted EBITDA growth in fiscal 2023. Pricing actions are expected to have a significant impact during the first half of the year.
Image Source: Zacks Investment Research
What Else is Driving Growth
TreeHouse Foods has always prioritized increasing the variety of products it offers through acquisitions. The company completed the acquisition of the majority of Riviana Foods' U.S. branded pasta portfolio in December 2020.
In February 2016, TreeHouse Foods paid $2.7 billion to acquire the Private Brands division. The Private Brands Business is the leading manufacturer of private label shelf stable. It refrigerated goods in the categories of bars, bakery, cereal, condiments, pasta and snacks. The addition of Private Brands increased revenues and assisted the company in reducing debt.
On the flip side, the company remains committed toward exiting underperforming businesses and shifting focus to areas with high growth potential. On Oct 3, 2022, TreeHouse Foods concluded the sale of a significant portion of its Meal Preparation business, which included pasta, pourable and spoonable dressing, preserves, red sauces, syrup, dry blends and baking, dry dinners, pie filling, pita chips and other sauces. With the divestiture, TreeHouse Foods is now well-positioned to take advantage of positive demand trends and drive growth in its higher-margin private label beverage and snacking categories.
These portfolio reshaping initiatives show how the company is concentrating on markets with greater growth potential, alongside strengthening its balance sheet.
Notably, the company provided a compelling fiscal 2023 guidance on its last earnings call. THS expects fiscal 2023 net sales growth in the range of 6-8% year over year, led by pricing. Adjusted EBITDA from continuing operations for the aforementioned period is anticipated to be in the $345-$365 million range, suggesting growth of 24% year over year at the midpoint.
Wrapping up
TreeHouse Foods has been battling escalated costs for a while now. In the fourth quarter of 2022, although the gross margin expanded year over year, it continued to bear the brunt of additional costs associated with labor and supply-chain disruptions along with warehouse capacity constraints. Management also expects that the macro environmental uncertainty will prevail in fiscal 2023. However, the company is on track to recover increased input costs via targeted pricing actions.
Shares of this Zacks Rank #3 (Hold) company have rallied 10.3% in the past three months compared with the industry’s growth of 2.6%.
3 Key Picks
Some top-ranked stocks are Inter Parfums (IPAR - Free Report) , General Mills (GIS - Free Report) and Kimberly-Clark Corporation (KMB - Free Report) .
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales and earnings suggests growth of 10.5% and 0.8%, respectively, from the year-ago reported numbers.
General Mills is a major designer, marketer and distributor of premium lifestyle products. It currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported numbers.
Kimberly-Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for Kimberly-Clark’s current financial year sales and earnings suggests growth of 1.7% and 5.2%, respectively, from the year-ago reported numbers.