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Why Is TreeHouse (THS) Up 4.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for TreeHouse Foods (THS - Free Report) . Shares have added about 4.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TreeHouse due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TreeHouse Foods Q1 Loss Wider Than Expected, Sales Dip Y/Y
TreeHouse Foods posted soft first-quarter 2024 results. The company reported an adjusted loss of 3 cents per share, which was wider than the Zacks Consensus Estimate of an adjusted loss of 2 cents. Also, the bottom line declined from adjusted earnings per share of 70 cents in the year-ago period.
Net sales of $820.7 million declined 3.9% year over year. However, the top line beat the Zacks Consensus Estimate of $797 million. The decrease in net sales resulted from the adverse volume/mix largely due to deliberate exits from certain distribution channels, especially in the coffee and in-store bakery segments. The restart of a broth facility also accounted for about half of the volume decrease. Pricing was slightly unfavorable due to specific pricing adjustments, driven by commodity costs. However, these negative impacts were partly mitigated by the volume/mix benefits of acquiring Coffee Roasting Capability.
Organic sales decreased 7.7% year over year. The volume/mix, excluding business acquisitions, contributed to a decrease of 2.8% in the reported period. The pricing and volume/mix impacts of the restart of the broth facility further led to declines of 2.6% and 2.3%, respectively.
The gross margin of 13.6% contracted 4.4 percentage points from the year-ago quarter mainly due to the restart of a broth facility, poor absorption of fixed costs resulting from reduced volume, higher labor costs and an unfavorable category mix.
Total operating expenses were $117.2 million, up from the $112.7 million reported in the year-ago quarter due to a $12.9-million decrease in TSA income after exiting certain TSA services. However, this was partially balanced by reductions in professional fees for strategic growth initiatives, TSA-related expense cuts and decreased freight costs.
Adjusted EBITDA from continuing operations totaled $46 million in the first quarter of 2024, a significant drop from $91.3 million in the first quarter of 2023, reflecting a decrease of $45.3 million. This reduction was primarily attributed to the restart of a broth facility, poor absorption of fixed costs due to reduced volume, higher labor costs, and an unfavorable category mix. However, this decline was partially mitigated by lower freight costs.
Other Updates
TreeHouse Foods concluded the quarter with cash and cash equivalents of $191.8 million, long-term debt of $1,396.5 million, and total shareholders’ equity of $1,608.1 million. In the first three months ended Mar 31, 2024, the company’s net cash used in operating activities from operating activities was $52.4 million.
Guidance
For 2024, TreeHouse Foods expects net sales of $3.43-$3.5 billion, which indicates growth of nearly flat to 2% from the 2023 reported level. Management expects the organic volume and mix to be slightly positive in the year, offset by modest pricing deflation. However, gains from the recent acquisitions are likely to positively impact the volume and mix. Adjusted EBITDA from continuing operations is likely to be $360-$390 million in 2024, whereas it reported $365.9 million in 2023.
For 2024, management expects a capital expenditure of $145 million and a free cash flow of at least $130 million.
For the second quarter of 2024, net sales are projected to be $770-$800 million, indicating a decline of 2% at the mid-point. THS expects organic volume and mix to be down in the low-single digits in the quarter. Similarly, pricing is expected to drop in the low-single digits. However, the company foresees a low-single-digit positive impact on volume and mix, resulting from the recently completed acquisitions.
The company expects second-quarter adjusted EBITDA from continuing operations of $55-$65 million. In the third quarter, management expects a sequential improvement in the adjusted EBITDA compared with the mid-point of the second quarter’s estimated range. This is likely to be driven by net sales improvement, cost-saving efforts, revert to enhanced service levels in the Broth business and additional pricing actions.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -65.81% due to these changes.
VGM Scores
Currently, TreeHouse has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TreeHouse has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is TreeHouse (THS) Up 4.2% Since Last Earnings Report?
It has been about a month since the last earnings report for TreeHouse Foods (THS - Free Report) . Shares have added about 4.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TreeHouse due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
TreeHouse Foods Q1 Loss Wider Than Expected, Sales Dip Y/Y
TreeHouse Foods posted soft first-quarter 2024 results. The company reported an adjusted loss of 3 cents per share, which was wider than the Zacks Consensus Estimate of an adjusted loss of 2 cents. Also, the bottom line declined from adjusted earnings per share of 70 cents in the year-ago period.
Net sales of $820.7 million declined 3.9% year over year. However, the top line beat the Zacks Consensus Estimate of $797 million. The decrease in net sales resulted from the adverse volume/mix largely due to deliberate exits from certain distribution channels, especially in the coffee and in-store bakery segments. The restart of a broth facility also accounted for about half of the volume decrease. Pricing was slightly unfavorable due to specific pricing adjustments, driven by commodity costs. However, these negative impacts were partly mitigated by the volume/mix benefits of acquiring Coffee Roasting Capability.
Organic sales decreased 7.7% year over year. The volume/mix, excluding business acquisitions, contributed to a decrease of 2.8% in the reported period. The pricing and volume/mix impacts of the restart of the broth facility further led to declines of 2.6% and 2.3%, respectively.
The gross margin of 13.6% contracted 4.4 percentage points from the year-ago quarter mainly due to the restart of a broth facility, poor absorption of fixed costs resulting from reduced volume, higher labor costs and an unfavorable category mix.
Total operating expenses were $117.2 million, up from the $112.7 million reported in the year-ago quarter due to a $12.9-million decrease in TSA income after exiting certain TSA services. However, this was partially balanced by reductions in professional fees for strategic growth initiatives, TSA-related expense cuts and decreased freight costs.
Adjusted EBITDA from continuing operations totaled $46 million in the first quarter of 2024, a significant drop from $91.3 million in the first quarter of 2023, reflecting a decrease of $45.3 million. This reduction was primarily attributed to the restart of a broth facility, poor absorption of fixed costs due to reduced volume, higher labor costs, and an unfavorable category mix. However, this decline was partially mitigated by lower freight costs.
Other Updates
TreeHouse Foods concluded the quarter with cash and cash equivalents of $191.8 million, long-term debt of $1,396.5 million, and total shareholders’ equity of $1,608.1 million. In the first three months ended Mar 31, 2024, the company’s net cash used in operating activities from operating activities was $52.4 million.
Guidance
For 2024, TreeHouse Foods expects net sales of $3.43-$3.5 billion, which indicates growth of nearly flat to 2% from the 2023 reported level. Management expects the organic volume and mix to be slightly positive in the year, offset by modest pricing deflation. However, gains from the recent acquisitions are likely to positively impact the volume and mix. Adjusted EBITDA from continuing operations is likely to be $360-$390 million in 2024, whereas it reported $365.9 million in 2023.
For 2024, management expects a capital expenditure of $145 million and a free cash flow of at least $130 million.
For the second quarter of 2024, net sales are projected to be $770-$800 million, indicating a decline of 2% at the mid-point. THS expects organic volume and mix to be down in the low-single digits in the quarter. Similarly, pricing is expected to drop in the low-single digits. However, the company foresees a low-single-digit positive impact on volume and mix, resulting from the recently completed acquisitions.
The company expects second-quarter adjusted EBITDA from continuing operations of $55-$65 million. In the third quarter, management expects a sequential improvement in the adjusted EBITDA compared with the mid-point of the second quarter’s estimated range. This is likely to be driven by net sales improvement, cost-saving efforts, revert to enhanced service levels in the Broth business and additional pricing actions.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -65.81% due to these changes.
VGM Scores
Currently, TreeHouse has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, TreeHouse has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.