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TreeHouse beats in 4Q on strong sales

OAK BROOK, Ill. (AP) -- TreeHouse Foods Inc. reported fourth-quarter net income that beat market expectations Thursday as the food manufacturer's sales improved. The company also said the challenges of rising food costs and grocery-industry issues that weighed on it in 2012 appear to moderating.

Its stock jumped more than 10 percent in trading on the news.

TreeHouse, based in Oak Brook, Ill., is a food manufacturer for grocery and foodservice distribution customers.

The company reported that its net income fell to $25.2 million, or 68 cents a share, for the quarter that ended Dec. 31. That's down from $29.9 million, or 81 cents a share, in the same quarter in the prior year.

After adjusting for restructuring costs tied to its soup operations and the closure of a Canadian salad dressing plant, it earned 86 cents per share versus 85 cents per share.

TreeHouse's fourth-quarter revenue increased nearly 11 percent to $592.8 million from $535.8 million on a recent acquisition, higher prices and improved mix of items sold. Its sales for its North American Retail Grocery segment increased 13 percent, while sales in its Food Away From Home were up rose 14 percent. But sales for its Industrial and Export segment fell almost 4 percent.

Analysts polled by FactSet were expecting the company to earn an adjusted 85 cents per share on revenue of $574.3 million.

TreeHouse said that the operating environment in 2012 turned out to be significantly different than it expected at the beginning of the year.

The company had initially anticipated moderate growth and a benign input cost environment. However, consumer food purchases didn't begin to rebound until very late in the year and drought conditions made food commodity prices very volatile.

TreeHouse said that it expects these pressures to moderate in 2013. It also said that the fourth quarter's sales gains of were encouraging and it expects to see a return to positive consumer purchases soon and issued a strong forecast for its 2013 fiscal year.

The company expects to earn between $3 and $3.10 per share on an adjusted basis. Analysts are forecasting $3.10 per share. It forecast revenue gains of 3.5 percent to 4.5 percent, which includes both the effect of its Naturally Fresh acquisition and the offsetting loss related a drop in sales of its soup products. Analysts are expecting revenue of $2.25 billion.

Sam K. Reed, chairman, president and CEO said that the company remains guarded but is optimistic. He also said the company will be very active in looking at its acquisition opportunities.

Citi analyst David Driscoll said that the company finished the year on a relatively good note after a disappointing 2012. He said the company's earnings forecast for 2013 is prudent at this time, but has the potential to come in higher.

Driscoll said he continues to see good things in store for TreeHouse and reiterated a "Buy" rating on its stock, noting it is his top pick in small-capitalization food companies.

Shares rose $5.35 to $58.23. Its shares have traded between $46.15 and $63.67 in the past 52 weeks.