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How's TreeHouse Foods (THS) Placed Ahead of Q4 Earnings?

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TreeHouse Foods, Inc. THS is slated to report fourth-quarter 2019 results on Feb 13. This packaged food and beverage company delivered a negative earnings surprise of 6.8% in the last reported quarter. Nonetheless, its earnings have outperformed the Zacks Consensus Estimate by 10.7%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for fourth-quarter earnings has been stable at $1.09 per share over the past 30 days. This suggests an increase of 5.8% from the year-ago period’s reported figure. However, the consensus mark for revenues stands at $1,161 million, indicating a decline of 21.6% from the figure reported in the year-ago period.

The Zacks Consensus Estimate for 2019 earnings per share stands at $2.38, suggesting a rise of 8.2% from the year-ago period. The consensus mark for revenues stands at $4.31 billion.

TreeHouse Foods, Inc. Price and EPS Surprise

TreeHouse Foods, Inc. Price and EPS Surprise

TreeHouse Foods, Inc. price-eps-surprise | TreeHouse Foods, Inc. Quote

Key Factors to Note

TreeHouse Foods has long been grappling with soft sales. In third-quarter 2019, sales declined year over year for the 10th consecutive time. The company has been particularly struggling with sluggish Baked Goods and Meal Solutions units for the last few quarters. Sales at both segments were hurt by SKU rationalization efforts, adverse volume/mix and currency rates in the last reported quarter. In the last earnings call, management stated that it expects volume declines in Baked Goods and Meals Solutions units to dent the company’s fourth-quarter sales.

Management expects net sales for the fourth quarter in a band of $1.11-$1.21 billion, indicating a year-over-year decline of 3% at the midpoint.  Further, 2019 sales are expected in the range of $4.26-$4.36 billion compared with $5.8 billion reported in 2018.

Nonetheless, TreeHouse Foods is benefiting from its restructuring initiatives. To this end, the company’s Structure to Win program bodes well. The plan is focused on aligning the company’s SG&A expenses with its division structures. The company earlier stated that it expects to maintain solid cost control in 2019, wherein the Structure to Win plan is likely to have yielded positive results. Notably, SG&A expenses were earlier expected to see an approximate decline of $20 million (on a net basis) in 2019. Apart from this, the company has been on track with its TreeHouse 2020 strategic plan that is aimed at restructuring the business as a whole. Alongside cost savings, the initiative focuses on refining portfolio and optimizing production and supply chain. These upsides along with a focus on better for you products bode well.

Management expects fourth-quarter adjusted earnings from continuing operations of $1.03-$1.23, suggesting a rise of 13% year on year at the midpoint. For 2019, adjusted earnings from continuing operations are expected in the range of $2.30-$2.50 per share compared with $2.20 reported in 2018.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for TreeHouse Foods this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Although TreeHouse Foods carries a Zacks Rank #3, its Earnings ESP of -1.84% makes surprise prediction difficult.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Smucker SJM presently has an Earnings ESP of +0.39% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kraft Heinz KHC currently has an Earnings ESP of +1.33% and a Zacks Rank #3.

Sanderson Farms SAFM currently has an Earnings ESP of +64.29% and a Zacks Rank #3.

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