We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Pinnacle Foods Upgraded to Buy: What's Driving the Stock?
Read MoreHide Full Article
On Dec 20, Zacks Investment Research upgraded Pinnacle Foods, Inc. to a Zacks Rank #2 (Buy), probably driven by the company’s acquisitions and robust estimate revisions. Going by the Zacks model, companies sporting a Zacks Rank #2 have strong chances of outperforming the broader market in the near term.
Why the Upgrade?
Market sentiments have been favoring Pinnacle Foods since the beginning of 2016, as evident from the 23% rise in the company’s share price year to date, outpacing the Zacks categorized Food-Miscellaneous/Diversified industry’s 7.8% growth. Further, the company’s estimates for fourth-quarter 2016 and the full year have been rising over the past 60 days, indicating solid momentum in the stock.
Notably, the company reported strong results for the third quarter 2016, wherein its bottom line beat the Zacks Consensus Estimate but revenues missed the same. In fact, the company has delivered an average positive surprise of 2.09% in the last four trailing quarters. Quarterly earnings of 53 cents per share surged 15.2% from the year-ago quarter figure, driven by double-digit sales growth, improved gross profit and a favorable productivity mix. Sales soared 19.3% year over year driven by the Boulder Brands acquisition (completed in January), higher pricing and increased volumes. Gross margin also expanded on the back of improved productivity, the Boulder Brands acquisition and a favorable product mix, offsetting the impact of input cost inflation.
In fact, the Boulder Brands takeover is expected to contribute approximately 8−9 cents to adjusted earnings per share for the full year. Moreover, it is expected to contribute in the range of $460−$480 million to net sales.
However, Pinnacle Foods faces headwinds in the form of higher introductory costs related to product innovation. Moreover, increased consumer marketing investment and currency woes are likely to hurt the company’s profits.
The company has been witnessing sluggish net sales for the Specialty Foods segment since the past two quarters, despite solid growth in the Snacks business, due to an increasingly competitive bidding environment for the already low-margin USDA stew business.
Nonetheless, with a motive to expand its distribution network and customer base, and persistent focus on innovation and strategic acquisitions backed by a strong portfolio of brands, Pinnacle Foods remains confident of boosting its growth over the long haul. The stock has a long-term earnings growth rate of 7.7% and a beta of 0.29, which makes it attractive.
A leading manufacturer, marketer and distributor of branded food products, Pinnacle Foods actively manages a diverse portfolio of iconic food brands and regularly innovates in order to further differentiate its brands in the marketplace. Moreover, Pinnacle Foods has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margin.
Mondelez International has an expected earnings growth rate of 13%. Further, it has delivered positive earnings surprises in three out of the trailing four quarters, leading to an average earnings surprise of 11.2%.
Meanwhile, Lancaster Colony and Sysco have an expected earnings growth rate of 3% and 8.8%, respectively.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Pinnacle Foods Upgraded to Buy: What's Driving the Stock?
On Dec 20, Zacks Investment Research upgraded Pinnacle Foods, Inc. to a Zacks Rank #2 (Buy), probably driven by the company’s acquisitions and robust estimate revisions. Going by the Zacks model, companies sporting a Zacks Rank #2 have strong chances of outperforming the broader market in the near term.
Why the Upgrade?
Market sentiments have been favoring Pinnacle Foods since the beginning of 2016, as evident from the 23% rise in the company’s share price year to date, outpacing the Zacks categorized Food-Miscellaneous/Diversified industry’s 7.8% growth. Further, the company’s estimates for fourth-quarter 2016 and the full year have been rising over the past 60 days, indicating solid momentum in the stock.
Notably, the company reported strong results for the third quarter 2016, wherein its bottom line beat the Zacks Consensus Estimate but revenues missed the same. In fact, the company has delivered an average positive surprise of 2.09% in the last four trailing quarters. Quarterly earnings of 53 cents per share surged 15.2% from the year-ago quarter figure, driven by double-digit sales growth, improved gross profit and a favorable productivity mix. Sales soared 19.3% year over year driven by the Boulder Brands acquisition (completed in January), higher pricing and increased volumes. Gross margin also expanded on the back of improved productivity, the Boulder Brands acquisition and a favorable product mix, offsetting the impact of input cost inflation.
PINNACLE FOODS Price, Consensus and EPS Surprise
PINNACLE FOODS Price, Consensus and EPS Surprise | PINNACLE FOODS Quote
In fact, the Boulder Brands takeover is expected to contribute approximately 8−9 cents to adjusted earnings per share for the full year. Moreover, it is expected to contribute in the range of $460−$480 million to net sales.
However, Pinnacle Foods faces headwinds in the form of higher introductory costs related to product innovation. Moreover, increased consumer marketing investment and currency woes are likely to hurt the company’s profits.
The company has been witnessing sluggish net sales for the Specialty Foods segment since the past two quarters, despite solid growth in the Snacks business, due to an increasingly competitive bidding environment for the already low-margin USDA stew business.
Nonetheless, with a motive to expand its distribution network and customer base, and persistent focus on innovation and strategic acquisitions backed by a strong portfolio of brands, Pinnacle Foods remains confident of boosting its growth over the long haul. The stock has a long-term earnings growth rate of 7.7% and a beta of 0.29, which makes it attractive.
A leading manufacturer, marketer and distributor of branded food products, Pinnacle Foods actively manages a diverse portfolio of iconic food brands and regularly innovates in order to further differentiate its brands in the marketplace. Moreover, Pinnacle Foods has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margin.
Stocks to Consider
Some better-ranked stocks in the broader consumer staples sector include Mondelez International, Inc. (MDLZ - Free Report) , Lancaster Colony Corporation (LANC - Free Report) and Sysco Corporation (SYY - Free Report) . All of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Mondelez International has an expected earnings growth rate of 13%. Further, it has delivered positive earnings surprises in three out of the trailing four quarters, leading to an average earnings surprise of 11.2%.
Meanwhile, Lancaster Colony and Sysco have an expected earnings growth rate of 3% and 8.8%, respectively.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>