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Can Robust Strategies Fuel Pinnacle Foods' (PF) Q4 Earnings?
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Pinnacle Foods Inc. is slated to report fourth-quarter 2017 results on Mar 1, before the opening bell. Notably, the company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 3.1%. Let’s delve deeper into how things are shaping up for this announcement and see if this manufacturer and distributor of branded food products can maintain its positive earnings surprise streak.
What to Expect?
In the past 30 days, the Zacks Consensus Estimate for the fourth quarter and 2017 has moved up by a penny to 95 cents and $2.56, respectively. Expected earnings for the quarter under review and 2017 depict a year-over-year rise of 20.3% and 19.1%, respectively. Notably, management expects 2017 adjusted earnings in the range of $2.55-$2.60 per share.
Further, analysts polled by Zacks expect net sales of $909.4 million for the fourth quarter, reflecting an improvement of 5.9% from the year-ago quarter. Also, the consensus mark for 2017 sales is pegged at $3.17 billion, reflecting year-over-year growth of 1.2%.
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise
Pinnacle Foods’ retail segments have been depicting strong in-market performance. Notably, third-quarter 2017 marked Pinnacle Foods’ 14th straight period of market share growth. Moreover, the company’s brand expansion initiatives combined with regular innovation are expected to further strengthen market share. Some noteworthy innovations in the past include new varieties of the Duncan Hines Decadent, Duncan Hines Perfect Size baking kits and Birds Eye product lines.
Acquisitions have been another vital growth driver for Pinnacle Foods. The company has been carrying out various acquisitions over the years to expand distribution network and customer base and boost long-term growth. In this regard, the acquisition of Boulder Brands deserves special mention as it has aided the company achieve significant growth in refrigerated foods. Moreover, the company expects to achieve Boulder Brands synergies of more than $15 million in 2017, which will benefit gross margin and SG&A. Further, additional synergies of $4-$6 million are expected in 2018.
The company also expects results to be stronger and projects gross margin for 2017 to be in line with 2016. Also, Pinnacle Foods is on track with its network optimization plan and is committed toward achieving its long-term margin goal for 2019 and onward. The company also has an operational excellence program to generate annual productivity savings across the supply chain. Productivity for 2017 is estimated to be little more than 4% of the cost of products sold.
Escalated Costs & Weak Specialty Unit Are Concerns
Although Pinnacle Foods’ well-chalked growth endeavors look impressive, escalated marketing and freight costs remain potent threats. Incidentally, the company witnessed increased marketing costs in the third quarter, which along with expenses related to discrete items and hurricanes dented the EBIT margin. Additionally, management expects higher freight rates associated with the hurricanes to linger throughout 2017. The company expects input cost inflation to be 3% on account of greater-than-anticipated transport costs.
Apart from this, sluggishness in the Specialty segment has been a concern for Pinnacle Foods. Reduced volume/mix, impacts from the Aunt Jemima (AJ) exit and lower net price realizations have been plaguing the segment’s performance as well. Moreover, the exit of the gardein private label business and soft food service sales hampered underlying sales and weighed upon the margin last quarter.
Final Thoughts & the Zacks Model
Nevertheless, we expect Pinnacle Foods to tide over such hurdles on the back of its efficient brand growth strategies, gains from acquisitions and carefully planned savings, and productivity enhancing initiatives.
To top it, our proven model shows that Pinnacle Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Here are some companies which, per our model, have the right combination of elements to deliver earnings beat.
United Natural Foods, Inc. (UNFI - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank #1.
Conagra Brands Inc. (CAG - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank #2.
The Estee Lauder Companies, Inc. (EL - Free Report) has an Earnings ESP of +0.18% and a Zacks Rank #2.
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With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Can Robust Strategies Fuel Pinnacle Foods' (PF) Q4 Earnings?
Pinnacle Foods Inc. is slated to report fourth-quarter 2017 results on Mar 1, before the opening bell. Notably, the company outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 3.1%. Let’s delve deeper into how things are shaping up for this announcement and see if this manufacturer and distributor of branded food products can maintain its positive earnings surprise streak.
What to Expect?
In the past 30 days, the Zacks Consensus Estimate for the fourth quarter and 2017 has moved up by a penny to 95 cents and $2.56, respectively. Expected earnings for the quarter under review and 2017 depict a year-over-year rise of 20.3% and 19.1%, respectively. Notably, management expects 2017 adjusted earnings in the range of $2.55-$2.60 per share.
Further, analysts polled by Zacks expect net sales of $909.4 million for the fourth quarter, reflecting an improvement of 5.9% from the year-ago quarter. Also, the consensus mark for 2017 sales is pegged at $3.17 billion, reflecting year-over-year growth of 1.2%.
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise
Pinnacle Foods, Inc. Price, Consensus and EPS Surprise | Pinnacle Foods, Inc. Quote
Factors Driving the Quarter
Pinnacle Foods’ retail segments have been depicting strong in-market performance. Notably, third-quarter 2017 marked Pinnacle Foods’ 14th straight period of market share growth. Moreover, the company’s brand expansion initiatives combined with regular innovation are expected to further strengthen market share. Some noteworthy innovations in the past include new varieties of the Duncan Hines Decadent, Duncan Hines Perfect Size baking kits and Birds Eye product lines.
Acquisitions have been another vital growth driver for Pinnacle Foods. The company has been carrying out various acquisitions over the years to expand distribution network and customer base and boost long-term growth. In this regard, the acquisition of Boulder Brands deserves special mention as it has aided the company achieve significant growth in refrigerated foods. Moreover, the company expects to achieve Boulder Brands synergies of more than $15 million in 2017, which will benefit gross margin and SG&A. Further, additional synergies of $4-$6 million are expected in 2018.
The company also expects results to be stronger and projects gross margin for 2017 to be in line with 2016. Also, Pinnacle Foods is on track with its network optimization plan and is committed toward achieving its long-term margin goal for 2019 and onward. The company also has an operational excellence program to generate annual productivity savings across the supply chain. Productivity for 2017 is estimated to be little more than 4% of the cost of products sold.
Escalated Costs & Weak Specialty Unit Are Concerns
Although Pinnacle Foods’ well-chalked growth endeavors look impressive, escalated marketing and freight costs remain potent threats. Incidentally, the company witnessed increased marketing costs in the third quarter, which along with expenses related to discrete items and hurricanes dented the EBIT margin. Additionally, management expects higher freight rates associated with the hurricanes to linger throughout 2017. The company expects input cost inflation to be 3% on account of greater-than-anticipated transport costs.
Apart from this, sluggishness in the Specialty segment has been a concern for Pinnacle Foods. Reduced volume/mix, impacts from the Aunt Jemima (AJ) exit and lower net price realizations have been plaguing the segment’s performance as well. Moreover, the exit of the gardein private label business and soft food service sales hampered underlying sales and weighed upon the margin last quarter.
Final Thoughts & the Zacks Model
Nevertheless, we expect Pinnacle Foods to tide over such hurdles on the back of its efficient brand growth strategies, gains from acquisitions and carefully planned savings, and productivity enhancing initiatives.
To top it, our proven model shows that Pinnacle Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Pinnacle Foods has an Earnings ESP of +4.39%. Also, it carries a Zacks Rank #3, which makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combinations
Here are some companies which, per our model, have the right combination of elements to deliver earnings beat.
United Natural Foods, Inc. (UNFI - Free Report) has an Earnings ESP of +2.62% and a Zacks Rank #1.
Conagra Brands Inc. (CAG - Free Report) has an Earnings ESP of +1.93% and a Zacks Rank #2.
The Estee Lauder Companies, Inc. (EL - Free Report) has an Earnings ESP of +0.18% and a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>