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Pinnacle Foods (PF) Prospects Look Bright: Time to Buy?
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Pinnacle Foods Inc. looks like a good choice for investors looking for a stock in a relatively safe consumer staples sector with wholesome returns. Consistent product innovation, strong acquisition and productivity saving measures are likely to help the company to stay on the growth trajectory in 2017.
Investors are also satisfied with the long-term prospect of this Zacks Rank #2 (Buy) company, which is evident from its share price movement. We observed that the stock has notably outperformed the Zacks categorized Food-Miscellaneous/Diversified industry over the past one year. While the stock yielded 30.0%, the industry gained 6.1% in the said time frame. On the other hand, the broader Consumer Staple sector, of which they are part of, grew 6.8% in the same time frame.
Solid Earnings Trend
The company has shown an uptrend in terms of earnings, as evident from its earnings beat in two of the trailing four quarters, with in-line earnings in the remaining two, marking an average positive earnings surprise of 1.7%. In fact, in the last 12 straight quarters, earnings have beaten Zacks Consensus Estimate in the past six quarters and posted in-line results in the remaining six. Further, earnings are anticipated to grow by 8.3% in the next five years.
On Feb 23, the food company reported its fourth-quarter 2016 results. While earnings were in line with the Zacks Consensus Estimate, revenues beat the same. Adjusted earnings of 79 cents per share grew 12.9% from the year-ago period. The upside was supported by double-digit sales growth, improved gross profits and favorable productivity mix.
Net sales of Pinnacle Foods increased 18.8% to $858.5 million in the fourth quarter. The improvement was driven by a 17.3% benefit from the Boulder Brands acquisition (completed in Jan 2016), increased volume/mix of 2.0%, partially offset by 0.5% lower net price realization. In the past seven straight quarters, sales have beaten the Zacks Consensus Estimate in two quarters and lagged in the remaining five quarters.
Adjusted gross profit increased 19.5%, while gross margin expanded 20 basis points (bps) to 31.2% on the back of improved productivity, the Boulder Brands acquisition, which offset the impact of input cost inflation and unfavorable product mix. Adjusted earnings before interest and taxes (EBIT) went up 19.6% to $182.5 million, driven by higher sales and gross profit.
Estimates of this stock are also increasing 2.4% and 0.4% for 2017 and 2018, respectively, over the past seven days. Moreover, the company anticipates 2017 and 2018 earnings to grow 19.5% and 6.2% respectively, on a year-over-year basis.
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise
The company raised its guidance for adjusted earnings for 2017 to a range of $2.55 to $2.60 from $2.43 to $2.48 per share (issued on Jan 23).
Driving Factors
A leading manufacturer, marketer and distributor of branded food products, Pinnacle Foods actively manages a diverse portfolio of iconic food brands and regularly innovates products 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.
The acquisition of Boulder Brands, completed in Jan 2016, provided Pinnacle with a new growth platform for refrigerated foods. The acquisition added the Udi's, Glutino, Smart Balance, Earth Balance and EVOL brands to the company's portfolio, as well as complementary foodservice, private label and Canadian businesses.
The benefits from the acquisition are expected to be spread over 2017. Boulder Brands is expected to contribute 1% to net sales and 3 cents per share to adjusted earnings in 2017. The company is expected to realize benefits of scale in areas such as procurement, manufacturing, and logistics.
However, the company has witnessed sluggish net sales and adjusted EBIT for the Specialty segment since past three consecutive quarters, despite solid growth in the Snacks business. Due to a heightened competitive bidding environment for the already low-margin USDA stew business, the company continues to expect Specialty to remain challenged through 2017, particularly in first quarter, reflecting lower sales of private label canned meat.
The company has witnessed sluggishness in Duncan Hines business due to continued category weakness and a heightened promotional environment in 2016, though it improved marginally in the second half of the year. Though the company plans to innovate the premium higher end of the category, the turnaround might take some time.
Taking the pros and cons into regard, we feel it will be a prudent decision to buy the stock for now.
While ConAgra Foods has a long-term earnings growth rate of 8.0%, Ingredion has a long-term earnings growth rate of 11.0%. Post Holdings has a long-term earnings growth rate of 5.0%.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop.
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Pinnacle Foods (PF) Prospects Look Bright: Time to Buy?
Pinnacle Foods Inc. looks like a good choice for investors looking for a stock in a relatively safe consumer staples sector with wholesome returns. Consistent product innovation, strong acquisition and productivity saving measures are likely to help the company to stay on the growth trajectory in 2017.
Investors are also satisfied with the long-term prospect of this Zacks Rank #2 (Buy) company, which is evident from its share price movement. We observed that the stock has notably outperformed the Zacks categorized Food-Miscellaneous/Diversified industry over the past one year. While the stock yielded 30.0%, the industry gained 6.1% in the said time frame. On the other hand, the broader Consumer Staple sector, of which they are part of, grew 6.8% in the same time frame.
Solid Earnings Trend
The company has shown an uptrend in terms of earnings, as evident from its earnings beat in two of the trailing four quarters, with in-line earnings in the remaining two, marking an average positive earnings surprise of 1.7%. In fact, in the last 12 straight quarters, earnings have beaten Zacks Consensus Estimate in the past six quarters and posted in-line results in the remaining six. Further, earnings are anticipated to grow by 8.3% in the next five years.
On Feb 23, the food company reported its fourth-quarter 2016 results. While earnings were in line with the Zacks Consensus Estimate, revenues beat the same. Adjusted earnings of 79 cents per share grew 12.9% from the year-ago period. The upside was supported by double-digit sales growth, improved gross profits and favorable productivity mix.
Net sales of Pinnacle Foods increased 18.8% to $858.5 million in the fourth quarter. The improvement was driven by a 17.3% benefit from the Boulder Brands acquisition (completed in Jan 2016), increased volume/mix of 2.0%, partially offset by 0.5% lower net price realization. In the past seven straight quarters, sales have beaten the Zacks Consensus Estimate in two quarters and lagged in the remaining five quarters.
Adjusted gross profit increased 19.5%, while gross margin expanded 20 basis points (bps) to 31.2% on the back of improved productivity, the Boulder Brands acquisition, which offset the impact of input cost inflation and unfavorable product mix. Adjusted earnings before interest and taxes (EBIT) went up 19.6% to $182.5 million, driven by higher sales and gross profit.
Estimates of this stock are also increasing 2.4% and 0.4% for 2017 and 2018, respectively, over the past seven days. Moreover, the company anticipates 2017 and 2018 earnings to grow 19.5% and 6.2% respectively, on a year-over-year basis.
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise | Pinnacle Foods, Inc. Quote
Full-Year 2017 Guidance Raised
The company raised its guidance for adjusted earnings for 2017 to a range of $2.55 to $2.60 from $2.43 to $2.48 per share (issued on Jan 23).
Driving Factors
A leading manufacturer, marketer and distributor of branded food products, Pinnacle Foods actively manages a diverse portfolio of iconic food brands and regularly innovates products 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.
The acquisition of Boulder Brands, completed in Jan 2016, provided Pinnacle with a new growth platform for refrigerated foods. The acquisition added the Udi's, Glutino, Smart Balance, Earth Balance and EVOL brands to the company's portfolio, as well as complementary foodservice, private label and Canadian businesses.
The benefits from the acquisition are expected to be spread over 2017. Boulder Brands is expected to contribute 1% to net sales and 3 cents per share to adjusted earnings in 2017. The company is expected to realize benefits of scale in areas such as procurement, manufacturing, and logistics.
However, the company has witnessed sluggish net sales and adjusted EBIT for the Specialty segment since past three consecutive quarters, despite solid growth in the Snacks business. Due to a heightened competitive bidding environment for the already low-margin USDA stew business, the company continues to expect Specialty to remain challenged through 2017, particularly in first quarter, reflecting lower sales of private label canned meat.
The company has witnessed sluggishness in Duncan Hines business due to continued category weakness and a heightened promotional environment in 2016, though it improved marginally in the second half of the year. Though the company plans to innovate the premium higher end of the category, the turnaround might take some time.
Taking the pros and cons into regard, we feel it will be a prudent decision to buy the stock for now.
Other Stocks to Consider
Some other favorably placed food stocks in the industry include ConAgra Foods Inc. (CAG - Free Report) , Ingredion, Inc. (INGR - Free Report) and Post Holdings, Inc. (POST - Free Report) . All the three stocks have a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
While ConAgra Foods has a long-term earnings growth rate of 8.0%, Ingredion has a long-term earnings growth rate of 11.0%. Post Holdings has a long-term earnings growth rate of 5.0%.
Everything You Need to Know About Snapchat BEFORE It Goes Public
You may be curious about the buzz surrounding Snap Inc.'s IPO on March 2. With the company expected to be valued around $22 billion, it is expected to be the largest IPO since 2014. But should you snap up this tech stock on Day 1?
In the 2017 IPO Watch List, you'll get an inside look at Snap's exciting prospects and potential challenges. You'll also learn about 4 other exciting tech companies with jaw-dropping growth. Each could go public in the coming months.
Imagine being in the first wave of investors to jump on a company with almost unlimited growth potential? This Special Report gives you the latest scoop.
Download this IPO Watch List today for free >>