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Here're 4 Food Stock Treats if You Find TreeHouse Foods Bland

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TreeHouse Foods, Inc. (THS - Free Report) has not been in a good shape lately, owing to its dismal sales trend — especially in the Baked Goods and Meal Solutions units. Also, the company is grappling with escalated costs. These factors have compelled quite a few investors to steer clear of this Zacks Rank #4 (Sell) stock, which has plummeted 17.8% in a year against the industry’s growth of 15.5%.

Clearly, there are players in the Food – Miscellaneous space, which have contributed to the industry’s solid run with their sound fundamentals and impressive performances. However, before that, let’s take account of the factors weighing on TreeHouse Foods.

Here's Why TreeHouse Foods Appears Unappetizing

TreeHouse Foods has been seeing soft sales for a while now. The company’s third-quarter 2019 results marked its tenth consecutive quarter of year-over-year sales decline. We note that this packaged food and beverage manufacturer has been battling weak trends in the Baked Goods and Meal Solutions units for the last few quarters. Sales in the Baked Goods segment fell 6.7% year over year in the third quarter, whereas net sales in the Meals Solutions unit declined 6.6%. Sales in both segments were hurt by SKU rationalization efforts, adverse volume/mix and currency rates.

Moreover, TreeHouse Foods has a significant international presence, courtesy of its manufacturing facilities in the United States, Canada and Italy. This keeps the company exposed to volatile currency movements, which in fact was a headwind in the last reported quarter. Apart from this, TreeHouse Foods’ gross margin contracted 150 basis points in the last reported quarter due to lower volumes and increased expenses related to change in regulatory requirements. Moreover, adjusted EBITDA from continuing operations declined 2.6% due to fixed-cost impacts stemming from lower volumes.

We believe that continuation of such trends might affect the company’s performance in the days ahead.

Food Space – Not Devoid of Delicacies

Despite having underperformers like TreeHouse Foods, the Food – Miscellaneous space appears buoyant, with a rank of #81, which places it among the top 32% of more than 250 Zacks industries. Certainly, there are companies in the space, which are benefiting from their focus on innovation, product launches and diversification, and solid pricing initiatives.

Also, benefits from acquisitions and divestitures are helping these companies boost their portfolio and focus on areas with better growth potential. Additionally, many food companies are gaining from efforts to augment organic and natural offerings in response to rising health consciousness. Stringent cost-containment efforts and efficient productivity programs are also helping a host of food players stand out.

On that note, we have highlighted four stocks from the Food – Miscellaneous universe, which carry a solid Zacks Rank and flaunt an impressive earnings surprise record.

4 Food Stocks Worth Relishing

General Mills, Inc. (GIS - Free Report) is undoubtedly a solid bet. This Zacks Rank #2 (Buy) stock has rallied 25.3% in a year, courtesy of its superb earnings surprise history. Notably, this Baltimore-based company has outperformed the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being roughly 10%. This global manufacturer and marketer of branded consumer foods is benefiting from key global strategies, robust cost-saving efforts and focus on innovation. General Mills’ Pet segment is doing well, in particular. Notably, the company has a long-term growth rate of 7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sysco Corporation (SYY - Free Report) is another promising pick. Carrying a Zacks Rank #2, this Houston, TX-based company’s shares have gained 34.8% in the past year. Sysco, which delivered a positive earnings surprise of 5.2%, on average, over the trailing four quarters, has been gaining from its focus on buyouts, strategies for 2020 and cost-containment measures. The company is especially benefiting from strength in its U.S. Foodservice segment, wherein local case volumes have been rising for more than five years now. Notably, this marketer and distributor of food and related products has a long-term growth rate of 9.9%.

Investors can also count on Campbell Soup Company (CPB - Free Report) . This Camden, NJ-based company’s earnings beat the Zacks Consensus Estimate by 11.8%, on average, in the trailing four quarters. Additionally, this Zacks Rank #2 stock has rallied as much as 43% in a year. Further, this provider of premium branded convenience food products carries a long-term growth rate of 6%. The company’s focus on the snacks business has been a major driver. Also, Campbell’s saving efforts along with commitment toward portfolio refinement bode well.

Kellogg Company (K - Free Report) also appears appetizing. This Zacks Rank #2 stock has grown 21.9% in a year’s time, courtesy of its impressive organic sales trend, yielding buyouts and solid productivity saving initiatives. Markedly, Kellogg’s earnings exceeded the consensus mark by 7.9%, on average, in the trailing four quarters. Also, this renowned ready-to-eat cereal and convenience food provider has a long-term growth rate of 6%.

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