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TreeHouse Foods Stock Gains 13% in 3 Months: What's Next for THS?
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TreeHouse Foods, Inc. (THS - Free Report) has recently provided investors with solid gains, appreciating 13.4% over the past three months. This performance outpaces both the industry’s 5.4% return and the S&P 500’s 2.7% return.
The upswing was driven by two robust, long-term consumer trends, which include the growth of private-label groceries in North America and the ongoing shift in consumer preferences toward snacking. TreeHouse Foods' focus on these segments is part of its broader transformation strategy aimed at solidifying its presence in the snacking and beverage categories.
The company's stock closed at $41.29 on Wednesday, well above its 52-week low of $33.28. This suggests a strong upward trajectory for the stock.
Image Source: Zacks Investment Research
Factors Behind TreeHouse Foods' Recent Upswing
TreeHouse Foods' private label products have consistently gained market share over the past two decades, and with grocery retailers making strategic investments in private brands, the company stands to benefit significantly. The elevated price gaps between national and private brands further support continued growth in the private label sector.
TreeHouse Foods' success in securing opportunities across various product categories, such as cookies, refrigerated dough, pretzels and pickles, has been a significant factor in building momentum for the company. By achieving growth in the above key product segments during the first half of the year, THS positions itself to continue its upward trajectory not only in the third and fourth quarters but also in the long term.
THS is focusing on improving its supply chain through several key initiatives, including the TreeHouse Management Operating System (TMOS) and enhancements in procurement and distribution. These efforts are designed to improve operational execution, boost margins and strengthen customer relationships.
The TMOS initiatives have already shown positive results in the first half of 2024, leading to increased overall equipment effectiveness and enhanced service levels. Further, the company expects to achieve gross cost savings of approximately $50 million in the second half of 2024, contributing to margin expansion during this period.
Components of TreeHouse Foods' Second-Half Sales Growth
The company anticipates higher volume periods during the second half of 2024, thanks to seasonal demand in categories such as coffee, creamer, hot cereal, refrigerated dough and broth. It expects its broth business to be a particularly strong contributor.
TreeHouse Foods has a robust pipeline of net sales opportunities that it is actively working to convert. To counteract inflationary pressures, the company has implemented price increases. This pricing adjustment, effective from the third quarter, is expected to positively impact net sales in the second half of the year.
Reflecting the positive sentiment around TreeHouse Foods, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their estimates for the current and next fiscal year by 2.2% to $2.31 and by 2% to $3.03 per share, respectively.
THS’s Stock Valuation
With a forward 12-month price-to-earnings of 14.73X, which is below the industry average of 16.70X, the stock presents a potentially attractive valuation for investors. A lower P/E ratio is usually an attractive opportunity for investors looking to accumulate shares, especially if they believe the company's future earnings will exceed current market expectations.
What’s Hurting THS’s Growth
Despite the positives, THS encountered $3 million in supply-chain headwinds during the second quarter, attributed mainly to higher labor costs and the impact of restoring its broth facility. The company's sales decreased by 1.9% in the second quarter due to pricing adjustments for commodities and were further influenced by adverse volume and mix effects from planned exits in the coffee and in-store bakery segments, along with the facility restoration.
The company has been grappling with high operating expenses in the second quarter, which has been weighing on its profits. The increase was due to lower TSA income and increased personnel and capability investments. These were partially offset by reduced freight costs and TSA-related expense reductions.
Final Thoughts
TreeHouse Foods' long-term growth potential seems to be bright. Despite facing short-term challenges, including supply-chain headwinds and a slight decline in sales, the company is actively addressing these issues through initiatives like TMOS, improved procurement and incremental pricing adjustments.
However, it is crucial to monitor the company's ability to navigate its current challenges and execute its strategies effectively. We believe investors should wait for a better entry point for TreeHouse Foods, which currently carries a Zacks Rank #3 (Hold).
3 Staple Stocks to Consider
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse (CHEF - Free Report) , Pilgrim’s Pride (PPC - Free Report) and Ollie's Bargain Outlet (OLLI - Free Report) .
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, currently sports a Zacks Rank #1. PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average.
The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.43%, respectively, from the prior-year reported level.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.6% and 12.71%, respectively, from the year-earlier levels.
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TreeHouse Foods Stock Gains 13% in 3 Months: What's Next for THS?
TreeHouse Foods, Inc. (THS - Free Report) has recently provided investors with solid gains, appreciating 13.4% over the past three months. This performance outpaces both the industry’s 5.4% return and the S&P 500’s 2.7% return.
The upswing was driven by two robust, long-term consumer trends, which include the growth of private-label groceries in North America and the ongoing shift in consumer preferences toward snacking. TreeHouse Foods' focus on these segments is part of its broader transformation strategy aimed at solidifying its presence in the snacking and beverage categories.
The company's stock closed at $41.29 on Wednesday, well above its 52-week low of $33.28. This suggests a strong upward trajectory for the stock.
Image Source: Zacks Investment Research
Factors Behind TreeHouse Foods' Recent Upswing
TreeHouse Foods' private label products have consistently gained market share over the past two decades, and with grocery retailers making strategic investments in private brands, the company stands to benefit significantly. The elevated price gaps between national and private brands further support continued growth in the private label sector.
TreeHouse Foods' success in securing opportunities across various product categories, such as cookies, refrigerated dough, pretzels and pickles, has been a significant factor in building momentum for the company. By achieving growth in the above key product segments during the first half of the year, THS positions itself to continue its upward trajectory not only in the third and fourth quarters but also in the long term.
THS is focusing on improving its supply chain through several key initiatives, including the TreeHouse Management Operating System (TMOS) and enhancements in procurement and distribution. These efforts are designed to improve operational execution, boost margins and strengthen customer relationships.
The TMOS initiatives have already shown positive results in the first half of 2024, leading to increased overall equipment effectiveness and enhanced service levels. Further, the company expects to achieve gross cost savings of approximately $50 million in the second half of 2024, contributing to margin expansion during this period.
Components of TreeHouse Foods' Second-Half Sales Growth
The company anticipates higher volume periods during the second half of 2024, thanks to seasonal demand in categories such as coffee, creamer, hot cereal, refrigerated dough and broth. It expects its broth business to be a particularly strong contributor.
TreeHouse Foods has a robust pipeline of net sales opportunities that it is actively working to convert. To counteract inflationary pressures, the company has implemented price increases. This pricing adjustment, effective from the third quarter, is expected to positively impact net sales in the second half of the year.
Reflecting the positive sentiment around TreeHouse Foods, the Zacks Consensus Estimate for earnings per share has seen upward revisions. Over the past 30 days, analysts have increased their estimates for the current and next fiscal year by 2.2% to $2.31 and by 2% to $3.03 per share, respectively.
THS’s Stock Valuation
With a forward 12-month price-to-earnings of 14.73X, which is below the industry average of 16.70X, the stock presents a potentially attractive valuation for investors. A lower P/E ratio is usually an attractive opportunity for investors looking to accumulate shares, especially if they believe the company's future earnings will exceed current market expectations.
What’s Hurting THS’s Growth
Despite the positives, THS encountered $3 million in supply-chain headwinds during the second quarter, attributed mainly to higher labor costs and the impact of restoring its broth facility. The company's sales decreased by 1.9% in the second quarter due to pricing adjustments for commodities and were further influenced by adverse volume and mix effects from planned exits in the coffee and in-store bakery segments, along with the facility restoration.
The company has been grappling with high operating expenses in the second quarter, which has been weighing on its profits. The increase was due to lower TSA income and increased personnel and capability investments. These were partially offset by reduced freight costs and TSA-related expense reductions.
Final Thoughts
TreeHouse Foods' long-term growth potential seems to be bright. Despite facing short-term challenges, including supply-chain headwinds and a slight decline in sales, the company is actively addressing these issues through initiatives like TMOS, improved procurement and incremental pricing adjustments.
However, it is crucial to monitor the company's ability to navigate its current challenges and execute its strategies effectively. We believe investors should wait for a better entry point for TreeHouse Foods, which currently carries a Zacks Rank #3 (Hold).
3 Staple Stocks to Consider
Here, we have highlighted three better-ranked food stocks, namely, The Chef's Warehouse (CHEF - Free Report) , Pilgrim’s Pride (PPC - Free Report) and Ollie's Bargain Outlet (OLLI - Free Report) .
The Chef’s Warehouse, which engages in the distribution of specialty food products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHEF has a trailing four-quarter earnings surprise of 33.7%, on average. The Zacks Consensus Estimated figure for The Chef’s Warehouse’s current fiscal year sales and earnings indicates growth of 9.7% and 12.6%, respectively, from the year-ago reported numbers.
Pilgrim’s Pride, which produces, processes, markets and distributes fresh, frozen and value-added chicken and pork products, currently sports a Zacks Rank #1. PPC delivered a positive earnings surprise of 27.3% in the trailing four quarters, on average.
The Zacks Consensus Estimated figure for Pilgrim’s Pride’s current financial-year earnings indicates growth of 183.43%, respectively, from the prior-year reported level.
Ollie's Bargain, the extreme-value retailer of brand-name merchandise, currently carries a Zacks Rank #2 (Buy). OLLI has a trailing four-quarter earnings surprise of 7.9%, on average.
The Zacks Consensus Estimated figure for Ollie's Bargain’s current financial-year sales and earnings indicates a rise of around 8.6% and 12.71%, respectively, from the year-earlier levels.