Pinnacle Foods, Inc.PF looks quite promising, buoyed by its impressive earnings history and solid growth strategies. The food company reported strong results for the third quarter of 2016, wherein its bottom line beat the Zacks Consensus Estimate, but revenues missed the same. In fact, the company has delivered an average positive surprise of 2.09% in the four trailing quarters.
PINNACLE FOODS Price, Consensus and EPS Surprise
Notably, the stock has surged a significant 25.4% year to date, clearly outperforming the Zacks categorized Food-Miscellaneous/Diversified industry, which noted growth of 8.6%.
Factors at Play
Pinnacle Foods is outperforming primarily due to its focus on innovation program, acquisitions and productivity efficiency. Moreover, sales received a boost after its Boulder Brands acquisition (completed in January). In fact, the Boulder Brands takeover is expected to contribute approximately 8−9 cents to adjusted earnings per share for the full year. Moreover, it is likely to contribute in a range of $460−$480 million to net sales.
However, Pinnacle Foods faces headwinds in the form of higher introductory costs related to product innovation. Moreover, increased consumer marketing investment and currency woes are likely to hurt the company's profits. The company has also been witnessing sluggish net sales for the Specialty Foods segment since the past two quarters, despite solid growth in the Snacks business, due to an increasingly competitive bidding environment for the already low-margin USDA stew business.
Nonetheless, with a motive to expand its distribution network and customer base, and persistent focus on innovation and strategic acquisitions backed by a strong portfolio of brands, Pinnacle Foods remains confident of enhancing its growth over the long haul. The stock has a long-term earnings growth rate of 6.5%, a dividend yield of 2.14% and a beta of 0.29, which makes it attractive.
A leading manufacturer, marketer and distributor of branded food products, Pinnacle Foods actively manages a diverse portfolio of iconic food brands and regularly innovates in order to further differentiate its brands in the marketplace. Moreover, Pinnacle Foods has an operational excellence program to generate annual productivity savings across the supply chain. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margin.
Stocks to Consider
Other well-positioned stocks in the broader consumer staples sector include Ingredion, Inc. INGR , Lancaster Colony Corporation LANC and Sysco Corporation SYY . All of them carry a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Ingredion has an expected earnings growth rate of 11%. Further, it has delivered positive earnings surprises in the trailing four quarters, leading to an average earnings surprise of 10.5%.
Meanwhile, Lancaster Colony and Sysco have an expected earnings growth rate of 3% and 8.6%, respectively.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
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