TreeHouse Foods, Inc.
) reported third-quarter 2013 adjusted earnings of 82 cents per
share, beating the Zacks Consensus Estimate of 77 cents by 6.5%.
Adjusted earnings per share also surpassed the year-ago earnings
of 70 cents by 17.1% backed by higher revenues in all its
Adjusted earnings exclude expenses related to the
restructuring of the company's soup operations, the closure of
the Seaforth, Ontario, Canada salad dressing plant and
integration costs related to the acquisition of Associated Brands
(completed in Oct 2013).
Revenues and Margins
Total revenue increased 5.4% year over year to $567.2 million
owing to acquisitions (Cains Foods and the aseptic cheese and
pudding business from Associated Milk Producers Inc.), as well as
higher volume and favorable mix. Revenues marginally beat the
Zacks Consensus Estimate of $566.0 million.
Reported gross margin declined 70 basis points (bps) to 20.3%
in the third quarter due to higher input costs, higher cost of
sales from Cains Foods and costs associated with restructurings
and facility consolidations. Operating income went down
marginally by 0.4% to $41.2 million mainly due to higher selling,
distribution, and general and administrative expenses, which were
up 6.9% from the year-ago level.
North American Retail Grocery segment
Net revenue for the segment climbed 4.5% year over year to
$401.9 million, driven by 2.3% increase in favorable volume/mix
and 2.7% gains from the acquisition of Cains Foods. Strong
performance in the single service beverage business and Mexican
sauces boosted sales of the segment. Direct operating income
margin in the reported quarter declined 20 basis points to 15.5%
due to higher input costs and the inclusion of higher acquisition
cost of Cains Foods, partially offset by lower freight
Food Away From Home segment
Net revenue for the segment climbed 7.8% year over year to
$96.9 million owing to a 12.8% increase from acquisitions and
pricing, partially offset by a 5.8% decrease in
volume/mix.However, direct operating income margin plummeted 70
bps and came in at 13.4% due to higher input costs and higher
cost of sales from the Cains Foods acquisition.
Industrial and Export segment
Net revenue for the segment went up 7.5% year over year to
$68.4 million primarily driven by a 5.5% increase from
acquisitions and a 2.3% increase in volume/mix. Direct
operating income margin in the third quarter also increased 10
basis points to 17.7% due to lower freight costs and a shift in
sales mix, partially offset by higher cost of sales from Cains
The company reaffirmed its adjusted earnings per share
guidance in the range of $3.07 to $3.12 per share for 2013,
including the contribution from the acquisitions of Cains Foods
and Associated Brands. The guidance reflects the company's
initiatives to increase its operational efficiencies and cost
Takeover of Associated Brands
On Oct 8, TreeHouse acquired Associated Brands from
privately-owned TorQuest Partners LLC and other shareholders for
187 million Canadian dollars (approximately $180 million) in
cash. The buyout is expected to expand TreeHouse's retail
presence in private-label dry grocery.
The acquisition is expected to be accretive to 2014 results
and will add approximately $200 million of sales and around 14
cents to 16 cents of earnings per share.
TreeHouse presently carries a Zacks Rank #2 (Buy). Other food
companies worth considering are
Omega Protein Corp
Pinnacle Foods Inc.
Boulder Brands Inc
). While Omega Protein carries a Zacks Rank #1 (Strong Buy),
Pinnacle Foods and Boulder Brands both hold a Zacks Rank #2
BOULDER BRANDS (BDBD): Free Stock Analysis
OMEGA PROTEIN (OME): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
TREEHOUSE FOODS (THS): Free Stock Analysis
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