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TreeHouse Foods (THS) Poised on Customer-Centric Excellence

TreeHouse Foods, Inc. THS is committed to reinforcing its standing as a prominent force in the private brand market, with a particular focus on expanding its influence in the more lucrative and rapidly growing snacking and beverage markets.

The company’s key focus has been on fortifying the supply chain, and ensuring efficiency in production, distribution and delivery. It expects to achieve gross supply-chain savings of $250 million over the next three years.

Simultaneously, THS emphasizes delivering top-notch service and product quality to meet and exceed customer expectations. This ongoing commitment underscores TreeHouse Foods' strategic approach to navigating the competitive landscape of the private brand market.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Refining Portfolio

TreeHouse Foods has been strategically reshaping its portfolio. The closure of the $61-million sale of its Lakeville, MN-based facility and Snack Bars business aligns with its focus on categories offering the greatest growth potential.

The company is set to acquire the Bick's pickle business in Canada for approximately $20 million, which is likely to enhance its presence in the pickle category and expand its footprint in Canada. This move, expected to be finalized in the fourth quarter of 2023, will enhance TreeHouse Foods' operational strength and capitalize on the current co-packing agreement with Bick's. This will introduce extra volume that contributes positively to profit margins into its manufacturing network.

Pricing Strategy Bodes Well

In the third quarter of 2023, TreeHouse Foods experienced a 3.6% year-over-year increase in its top line to $863.3 million. This upside was primarily attributed to the company's effective pricing strategies. Notably, pricing rose 3.2% in the quarter, gearing toward mitigating commodity inflation.

Adjusted EBITDA from continuing operations saw a notable rise, reaching $89.9 million in the third quarter of 2023 from $79.6 million in the prior-year quarter. This increase is largely credited to the success of TreeHouse Foods' pricing initiatives, setting a positive trajectory for sales benefits throughout 2023.

Growth Strategies Underway

THS Foods has been focused on strategies like fueling category leadership in high-appeal sections, extending customer ties by offering private brand priorities, creating a robust supply chain, operating as a more focused organization, becoming a talent leader, and undertaking strict capital allocation.

The company has outlined a comprehensive growth strategy for 2024-2027. THS’ objectives encompass achieving net sales growth between 3% and 5%, attaining adjusted EBITDA growth of 8-10%, and generating a free cash flow in excess of $200 million.

Not All Looks Rosy for THS

Although TreeHouse Foods is well-placed for 2023 due to its actions to focus on greater-margin private-label snacking and beverage categories, discouragingly, management lowered its net sales guidance for fiscal 2023 when it reported the third-quarter results. For fiscal 2023, TreeHouse Foods expects year-over-year adjusted net sales growth of 4.5% to $3.4-$3.5 billion, down from previously stated growth of 7.5-9.5% to $3.71-$3.78 billion. The updated forecast considers the sale of the Snack Bars business, the effects of a voluntary product recall, a discrete supply-chain disruption and ongoing consumer demand patterns.

For the fourth quarter of 2023, revenues are projected to be $910-$940 million, implying a 3% year-over-year decline at the mid-point primarily due to an anticipated decline from a voluntary product recall and a specific supply-chain disruption.

Nonetheless, TreeHouse Foods has been focused on maximizing opportunities within its chosen categories.

Shares of this Zacks Rank #3 (Hold) company have lost 14.1% in the past three months compared with the industry’s decline of 6.3%.

3 Hot Stocks to Consider

We have highlighted three better-ranked stocks, namely Lamb Weston Holdings, Inc. LW, Celsius Holdings, Inc. CELH and Freshpet Inc. FRPT.

Lamb Weston is a leading global manufacturer, marketer and distributor of value-added frozen potato products, particularly French fries. It also provides a range of appetizers. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Lamb Weston Holdings’ current fiscal-year sales and EPS suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported figures. LW has a trailing four-quarter earnings surprise of 46.2%, on average.

Celsius Holdings specializes in commercializing healthier, nutritional, and functional foods, beverages and dietary supplements. The company currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and EPS suggests growth of 98.5% and 184.1%, respectively, from the year-ago reported figures. CELH has a trailing four-quarter earnings surprise of 110.9%, on average.

Freshpet is a pet food company. The company manufactures and markets natural fresh foods, refrigerated meals, and treats for dogs and cats. The company currently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS suggests growth of 26.8% and 27.1%, respectively, from the year-ago reported figures. FRPT has a trailing four-quarter earnings surprise of 7%, on average.

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Freshpet, Inc. (FRPT) : Free Stock Analysis Report

TreeHouse Foods, Inc. (THS) : Free Stock Analysis Report

Lamb Weston (LW) : Free Stock Analysis Report

Celsius Holdings Inc. (CELH) : Free Stock Analysis Report

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