Markets
FLO

Pinnacle Foods Grows on Acquisitions Despite Cost Pressure

On Oct 19, 2015, we issued an updated research report on Pinnacle Foods, Inc.PF .

Pinnacle Foods has a strong portfolio of brands and intends to continue to invest in innovation in order to further differentiate its brands in the marketplace. The food company has also been carrying out various acquisitions over the years to grow its distribution network and customer base and boost long-term growth.

In Mar 2014, Pinnacle acquired the Duncan Hines manufacturing business from Gilster, the company's primary co-packer. Then in Nov 2014, the company acquired Garden Protein, the rapidly growing manufacturer of the plant-based protein brand Gardein. This business continues to grow at strong double digit rate across both the traditional and natural organic channels.

The company also has an operational excellence program in place designed to generate annual productivity savings across the supply chain. The company set a savings target in the range of 3% to 4% of annual cost of products sold, which has been achieved over the last five years. These productivity savings, along with higher pricing have been mitigating the impact of input cost inflation to drive gross margins.

However, in the last reported second quarter 2015 results in July, Pinnacle Foods incurred higher product introductory costs for the two new Birds Eye platforms. Increased investment in consumer marketing and input cost inflation also increased costs. Manufacturing costs in the quarter were also somewhat elevated due to increased innovation. Apart from this, heightened promotional activity in the baking category also impacted profits. Unfavorable impact of the timing of Easter and currency headwinds also hurt sales and earnings. As a result, the company has squeezed its earnings guidance for the year.

Pinnacle Foods carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Investors interested in the food industry can also consider stocks like Cal-Maine Foods, Inc. CALM , Flower Foods, Inc. FLO and The J. M. Smucker Company SJM . While Cal-Maine Foods sports a Zacks Rank #1 (Strong Buy), Flower Foods and Smucker hold a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SMUCKER JM (SJM): Free Stock Analysis Report

CAL-MAINE FOODS (CALM): Free Stock Analysis Report

PINNACLE FOODS (PF): Free Stock Analysis Report

FLOWERS FOODS (FLO): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

FLOCALMSJM

Other Topics

Stocks

Latest Markets Videos

Zacks

Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

Learn More