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Pinnacle Foods (PF) Shares Gaining Momentum: Here's Why

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Shares of packaged foods maker Pinnacle Foods, Inc. have been gaining momentum for the last one year. The company’s strong brands portfolio, innovation programs, robust acquisitions and productivity efficiency are driving the stock.

Pinnacle Foods’ shares also received a boost after media reports claimed on Jun 2 that Conagra Brands Inc. (CAG - Free Report) is interested in acquiring the company. Even though there is no certainty of the deal, analysts believe that the acquisition will benefit Conagra as the company is planning to expand its frozen foods business, where Pinnacle Foods already has a solid presence.

Let’s delve deeper and find out what’s driving the stock.

Price Performance

Looking into the share price movement, we observed that the stock notably outperformed the Zacks categorized Food – Miscellaneous/Diversified industry in the last one year. While the stock rallied 38.9%, the industry declined 1.2% in the said time frame. On the other hand, the broader Consumer Staple sector, of which they are part of, grew 5.7%.

Estimates Moving Up

The Zacks Consensus Estimate for full-year 2017 and 2018 have been rising for the last 60 days. The Zacks Consensus Estimate of $2.59 per share inched up 0.8% and reflects a year-over-year increase of 20.5%. The Zacks Consensus Estimate of $2.79 per share for 2018 is up 1.1% and reflects a year-over-year increase of 7.6%.

Pinnacle Foods, Inc. Price, Consensus and EPS Surprise

 

Pinnacle Foods, Inc. Price, Consensus and EPS Surprise | Pinnacle Foods, Inc. Quote

Strong Q1 Results

Despite revenues missing estimates, Pinnacle Foods reported upbeat first-quarter 2017 earnings. In fact, the company has beat earnings estimates in six out of the trailing eight quarters and posted in-line results in the remaining two. Earnings of 50 cents per share grew 25% from the year-ago quarter led by higher sales growth, improved gross profit and favorable productivity mix. Sales increased 1.6% year over year driven by the acquisition of Boulder Brands Inc, higher pricing and favorable currency, partially offset by lower volume/mix. Further, the company reaffirmed its earnings guidance for 2017.

Parsippany, NJ-based Pinnacle Foods, whose brands include Duncan Hines’ baking products and Birds Eye’s frozen vegetables, has inclined toward healthier offerings with the acquisition of Boulder Brands, owner of Udi's Gluten Free Bread, last year. In the past too, Pinnacle Foods acquired many businesses to enrich its portfolio. The company acquired the Duncan Hines’ manufacturing business in Mar 2014.

In Nov 2014, the company acquired Garden Protein, which is growing across both the traditional and natural organic channels. In 2013, Conagra acquired the Wish-Bone salad dressings business from Unilever PLC (UL - Free Report) .

The company has a strong brand portfolio and intends to continue investing in innovation products 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 margins.

Zacks Rank and Other Stock to Consider

Pinnacle Foods currently carries a Zacks Rank #3 (Hold).

Investors interested in food stocks in the industry can consider SunOpta, Inc. (STKL - Free Report) , which has a long-term earnings growth rate of 15.00% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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