TreeHouse Foods, Inc. (THS Quick QuoteTHS - Free Report) is benefiting from its effective pricing strategies. The company saw a positive contribution from Price Net of Commodities in the third quarter of fiscal 2023 as it continued to recover from inflation.

The company concentrates on several strategies, including leading in popular product categories, strengthening customer relationships with private brand offerings, building a solid supply chain, focusing on efficient operations, attracting top talent, and being careful in financial management.

At the same time, THS prioritizes providing excellent service and high-quality products to not just meet but exceed customer expectations. These continuous efforts highlight TreeHouse Foods' strategy in the private brand marketplace.

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Pricing Acts as a Driver

In the fiscal third quarter, TreeHouse Foods experienced a 3.6% year-over-year increase in its top line to $863.3 million. This upside was primarily attributed to the company's effective pricing strategies. Notably, pricing rose 3.2% in the quarter, gearing toward mitigating commodity inflation.

Adjusted EBITDA from continuing operations saw a notable rise, reaching $89.9 million in the fiscal third quarter from $79.6 million in the prior-year quarter. This increase is largely credited to the success of TreeHouse Foods' pricing initiatives, setting a positive trajectory for sales benefits throughout 2023.

Strategic Portfolio Management

The company's focus on high-growth, high-margin categories and divestiture of non-core businesses shows strategic portfolio management aimed at enhancing profitability. The completion of the $61-million transaction, involving the sale of its Lakeville, MN-based facility and the Snack Bars division, is in line with the company's strategy to concentrate on sectors with the highest potential for growth.

TreeHouse Foods is on track to acquire the Bick's pickle brand in Canada for an estimated $20 million. This acquisition is anticipated to bolster the company's presence in the pickle market and extend its reach within Canada.

Scheduled for completion in the fourth quarter of fiscal 2023, this acquisition is expected to strengthen TreeHouse Foods' operational capabilities and build upon the existing co-packing arrangement with Bick's. The deal will introduce additional production volume, which is projected to have a positive impact on the company's profit margins.

Supply-Chain Initiatives Bode Well

Treehouse Foods' supply-chain initiatives aim to achieve $250 million in savings over three years, supporting long-term growth. Key strategies include implementing the Treehouse Management Operating System across manufacturing networks, improving overall equipment effectiveness, and optimizing logistics and distribution networks.

These measures have been contributing significantly to financial performance, with operations and supply-chain improvements adding $4 million year over year in the fiscal third quarter.

Driven by these factors, the company has outlined a comprehensive growth strategy for 2024-2027. THS’ objectives encompass achieving net sales growth of 3-5%, attaining adjusted EBITDA growth of 8-10% and generating a free cash flow in excess of $200 million.

Downward Outlook

Despite TreeHouse Foods' strategic focus on high-margin private-label snacking and beverage categories for 2023, there are some challenges ahead. The company revised its net sales outlook for fiscal 2023 downward in its fiscal third-quarter report.

For fiscal 2023, TreeHouse Foods expects year-over-year adjusted net sales growth of 4.5% to $3.4-$3.5 billion, down from previously stated growth of 7.5-9.5% to $3.71-$3.78 billion.

For the fourth quarter of fiscal 2023, revenues are projected to be $910-$940 million, implying a 3% year-over-year decline at the mid-point primarily due to an anticipated decline from a voluntary product recall and a specific supply-chain disruption.

Shares of this Zacks Rank #3 (Hold) company have lost 9.7% in the past three months compared with the industry’s decline of 0.9%.

3 Hot Stocks to Consider

We have highlighted three better-ranked stocks, namely MGP Ingredients, Inc. (MGPI Quick QuoteMGPI - Free Report) , Celsius Holdings (CELH Quick QuoteCELH - Free Report) and The Kraft Heinz Company (KHC Quick QuoteKHC - Free Report) .

MGP Ingredients produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and EPS suggests growth of 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2%, on average.

Celsius Holdings, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 81.6% in the third quarter of 2023.

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 98.5% and 185.2%, respectively, from the year-ago reported numbers. CELH has a trailing four-quarter earnings surprise of 110.9%, on average.

The Kraft Heinz Company is one of the largest consumer packaged food and beverage companies. It currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for The Kraft Heinz Company’s current financial-year sales and earnings suggests growth of 1% and 6.5%, respectively, from the year-ago reported numbers. KHC has a trailing four-quarter earnings surprise of 9.9%, on average.