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Pinnacle Foods Upgraded to Strong Buy

Zacks Equity Research

Zacks Investment Research upgraded Pinnacle Foods, Inc (PF) to a Zacks Rank #1 (Strong Buy) on Aug 31 on the back of impressive second quarter fiscal 2013 results and enhanced guidance for the year.

Why the Upgrade?

Pinnacle Foods reported solid second quarter fiscal 2013 results on Aug 14. Earnings of 29 cents surged 70.6% from the year-ago earnings, bolstered by improved gross margins through effective productivity programs and ongoing improvement in product mix.

The company also beat the Zacks Consensus Estimate by 7.4%. In fact, Pinnacle Foods has been performing quite since its listing in New York Stock Exchange in Mar 2013. Last quarter the company posted a positive surprise of 17.24%.

Though the earlier timing of Easter in 2013 led to a decline in total sales in the second quarter, gross profits increased 9.3% owing to productivity savings, higher net pricing and favorable product mix which more than offset lower volumes and modest input costs in the quarter.

On Aug 13, Pinnacle Foods has announced to acquire Wish-Bone salad dressing business from consumer giant Unilever Plc (UL). The company expects the deal to close late in the third quarter or early in the fourth quarter of 2013 and expects it to be accretive to earnings in fiscal 2013 by 1-2 cents per share.

The Wish-Bone brand has attractive margins and the acquisition is expected to immediately enhance Pinnacle’s profits. The deal fits to the company’s 'Reinvigorating Iconic Brands' strategy, which involves actively managing iconic food brands with leading market positions.

The company expects the acquisition to benefit the company and has thus raised its earnings outlook for fiscal 2013. Pinnacle Foods expects its adjusted earnings per share in the range of $1.53 to $1.57, up from the prior guidance of $1.49 to $1.55 per share.

Estimates have mostly increased after the strong second quarter results and an upbeat outlook for the year. The Zacks Consensus Estimate increased 1.3% to $1.55 per share for fiscal 2013, while it grew 4.2% to $1.73 per share for fiscal 2014 over the past 30 days.

Other Stocks to Consider

Other consumer staples worth considering are Dole Food Co. Inc (DOLE) and Boulder Brands Inc (BDBD), both carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on PF

Read the Full Research Report on UL

Read the Full Research Report on BDBD

Read the Full Research Report on DOLE

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