In the wake of coronavirus, several food companies are benefiting from rising demand owing to increased at-home consumption and stockpiling trends. This has, in fact, boosted sales of several food players, including TreeHouse Foods, Inc. THS. Other than this, the company has been gaining on its TreeHouse 2020 program and focus on refining the portfolio.
Courtesy of such upsides, this Zacks Rank #2 (Buy) stock has rallied almost 24% in the past three months compared with the industry’s growth of 23.5%. Moreover, the company has a VGM Score of B and a long-term earnings per share growth rate of 6.5%. Certainly, TreeHouse Foods appears to be a solid bet at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coronavirus-Led Demand & Q2 View Fuel Estimates
In first-quarter 2020, both top and bottom lines beat the Zacks Consensus Estimate and improved year over year. The company’s retail business catered well to the unexpected rise in demand in March amid the pandemic. This compensated for softness in the food-away-from-home business. Notably, adjusted EBITDA was in line with the forecast despite the company incurring higher costs to increase production shifts and ensure the availability of labor at all manufacturing and distribution facilities. Even Kellogg K, Kraft Heinz KHC and Flowers Foods FLO benefited from the burgeoning demand stemming from the coronavirus-led stock hoarding.
TreeHouse Foods, Inc. Price, Consensus and EPS Surprise
TreeHouse Foods, Inc. price-consensus-eps-surprise-chart | TreeHouse Foods, Inc. Quote
Meanwhile, as TreeHouse Foods expects greater at-home consumption in the near term, its second-quarter net sales are expected in a band of $1.05-$1.09 billion, indicating growth of about 4% at the midpoint. Further, management expects adjusted earnings from continuing operations of 40-50 cents, suggesting a roughly 13% increase at the midpoint. We note that the consensus mark for second-quarter and 2020 earnings per share has moved north by 4.5% to 46 cents and 1.2% to $2.58, respectively, over the past 60 days.
Other Growth Drivers
The company is now in the last year of its TreeHouse 2020 strategic plan that was announced in second-quarter 2017. Alongside cost savings, the initiative is expected to manage the company’s portfolio and optimize production and supply chain. The plan aims to improve the company’s operating margin by 300 bps by the end of 2020, by undertaking complete business integration and expense reduction. The company expects to invest these savings in market-differentiated capacities to cater to consumers’ ever-changing demands. In this regard, the company made certain achievements in the first phase of the program. It is also progressing well with the TreeHouse Management Operating Structure or TMOS.
TreeHouse Foods has always been focused on expanding its product offerings through acquisitions. The addition of Private Brands (acquired in Feb 2016) has added value to the company. Other notable acquisitions include Flagstone Foods, PFF Capital Group, Inc. (“Protenergy”), Cains Foods, L.P., Associated Brands, and Naturally Fresh, Inc. On the flip side, the company remains committed toward exiting underperforming businesses and shifting focus to areas with high growth potential. To this end, the company completed the divestiture of the Snack business to Atlas Holdings on Aug 1.
These factors along with a focus on organic offerings are likely to help TreeHouse Foods add new leaves to its growth story.
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