You must take a look at the leading food products manufacturer and distributor, Pinnacle Foods Inc. (PF - Free Report) as the stock exhibited a bullish run, over the past one year. Shares of this Zacks Rank #3 (Hold) company have outperformed both the Zacks categorized Food – Miscellaneous/Diversified industry and the broader sector in the past year.
The stock surged 45% against the industry’s fall of 0.3%. Meanwhile, the Zacks categorized Consumer Staples sector, of which they are part of, gained 6.4% over the same time frame.
In addition, the stock hit a 52-week high of $61.71 yesterday, though it closed a tad lower at $61.29. Further, it has a long-term earnings growth rate of 9.3%, highlighting its inherent potential.
Let’s Delve Deep
Armed with a robust brand portfolio, Pinnacle Foods actively manages its diverse portfolio of iconic food brands that enjoy strong household penetration in the U.S. Moreover, management makes regular product innovations to offer variety and maintain its market share. Recently, it also decided to exit the low-margin and non-strategic Aunt Jemima frozen breakfast products in order to focus on its core portfolio.
Additionally, the company has been carrying out acquisitions over the years to grow its distribution network and customer base. In fact, the buyout of Boulder Brands is anticipated to contribute 1% to net sales and 3 cents per share to adjusted earnings in 2017. Moving ahead, Pinnacle Foods is expected to realize benefits of scale in areas such as procurement, manufacturing and logistics.
Pinnacle Foods appears compelling from the earnings perspective as well. Evidently, its earnings have outpaced the Zacks Consensus Estimate in six of the past eight quarters, including the recently reported first-quarter 2017. Also, its first-quarter earnings per share grew 25% year over year supported by higher sales growth, improved gross profits and favorable productivity mix.
Management has also reaffirmed its earnings guidance for 2017 and continues to expect earnings in the range of $2.55–$2.60 per share. In fact, the Zacks Consensus Estimate for 2017 that has increased by 2 cents over the last 30 days is currently pegged at $2.59.
Sales increased 1.6% year over year driven by the Boulder Brands acquisition, higher pricing and favorable currency, partially offset by lower volume/mix. However, the company’s top line missed the Zacks Consensus Estimate in five of the past seven quarters, including the first quarter.
Moreover, Pinnacle Foods has witnessed sluggish net sales and adjusted EBIT for the Specialty segment since past three consecutive quarters. Due to a heightened competitive bidding environment for the already low-margin USDA stew business, the company continues to expect Specialty business to remain challenged through 2017. Further, the company continues to expect input cost inflation in the range of 2.5−3% for the year.
Stocks to Consider
Better-ranked stocks in the same industry include SunOpta Inc. (STKL - Free Report) , Aramark (ARMK - Free Report) and Lamb Weston Holdings, Inc. (LW - Free Report) .
SunOpta, with a long-term earnings growth rate of 15% has skyrocketed 189% in the past one year. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Aramark carries a Zacks Rank #2 (Buy) and has a long-term earnings growth rate of 12.8%.
Lamb Weston, a Zacks Rank #2 stock has surged 47% in the past year. Also, it has a long-term earnings growth rate of 4.2%.
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