A month has gone by since the last earnings report for TreeHouse Foods (THS Quick QuoteTHS - Free Report) . Shares have added about 11.9% 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 catalysts.

TreeHouse Foods Q2 Earnings Beat Estimates, Sales Drop

TreeHouse Foods second-quarter 2024 adjusted earnings of 29 cents per share, beating the Zacks Consensus Estimate of 13 cents. However, the bottom line slumped from 43 cents reported in the year-ago quarter.

Net sales of $788.5 million dropped 1.9% year over year. The downside was primarily caused by pricing adjustments related to commodities. The decline was due to adverse volume/mix effects from planned distribution exits, particularly in the coffee and in-store bakery categories and the restoration of one of its broth facilities. This downtick was partially offset by increased volume/mix from the acquisition of Coffee Roasting Capability and new business wins. The top line beat the Zacks Consensus Estimate of $783.7 million.

Organic sales decreased 5% year over year. The volume/mix, excluding business acquisitions, contributed to a decline of 1.1% in the reported period. The pricing and volume/mix impacts of the restart of the broth facility further led to declines of 3% and 0.9%, respectively.

The gross margin of 16.3% contracted by 0.3 percentage points from the year-ago quarter, mainly due to the expenses associated with restoring its broth facilities. Total operating expenses were $132.3 million, up from the $102.9 million reported in the year-ago quarter. The increase was mainly due to a $19.3 million non-cash impairment charge for exiting the Ready-to-drink beverages business. This was compounded by higher personnel and capability investments and lower TSA income, though partially offset by reduced freight costs and TSA-related expense reductions.

Adjusted EBITDA from continuing operations totaled $70.6 million, a decline from $76.3 million in second-quarter 2023. This reduction was mainly due to investments in personnel and capabilities and the restoration of one of the broth facilities. However, the plunge was partially mitigated by supply chain savings, including reduced commodity and freight costs.

Other Updates

TreeHouse Foods concluded the quarter with cash and cash equivalents of $105.8 million, long-term debt of $1,398.2 million and total shareholders’ equity of $1,550.1 million. In the first six months ended Jun 30, 2024, the company’s net cash used in operating activities from operating activities was $71.8 million.

In the second quarter, THS bought back 1.3 million shares for $44.8 million (excluding excise tax). At the end of the quarter, THS had shares worth $78 million available under its buyback authorization.

Guidance

For 2024, TreeHouse Foods still expects net sales of $3.43-$3.5 billion, which indicates growth of nearly flat to 2% from the 2023 reported level. Management revised its adjusted EBITDA guidance to a range of $360-$380 million, lowering the upper end of the range by $10 million. This revision accounts for performance in the first half of the year and assumes that current consumer-driven mix trends will persist in the second half.

For 2024, management expects capital expenditures of nearly $145 million and a free cash flow of at least $130 million.

Net sales for the third quarter are projected to be between $865 and $895 million, reflecting flat to 4% year-over-year growth. Organic volume and mix are anticipated to increase by low-single digits, while pricing is expected to remain stable. Adjusted EBITDA from continuing operations for the third quarter is estimated to range from $98 to $108 million. This expectation takes into account a timing shift due to favorable freight costs being realized in the second quarter instead of the third.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -8.92% due to these changes.

VGM Scores

Currently, TreeHouse has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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.

Performance of an Industry Player

TreeHouse belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, Post Holdings (POST Quick QuotePOST - Free Report) , has gained 4.6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

Post Holdings reported revenues of $1.95 billion in the last reported quarter, representing a year-over-year change of +4.8%. EPS of $1.54 for the same period compares with $1.52 a year ago.

For the current quarter, Post Holdings is expected to post earnings of $1.20 per share, indicating a change of -26.4% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Post Holdings. Also, the stock has a VGM Score of A.