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TreeHouse Foods, Inc. THS is benefiting from its focus on refining the portfolio and enhancing organic foods offering. Apart from these, the company is gaining from higher demand stemming from coronavirus-led stockpiling and increased at-home consumption amid the coronavirus outbreak.
Burgeoning Demand & Impressive Outlook
Higher demand amid the coronavirus pandemic bolstered the company’s second-quarter 2020 results, with the top and the bottom lines advancing year over year. Also, earnings beat the Zacks Consensus Estimate. TreeHouse Foods’ retail business catered well to the unexpected rise in demand amid the pandemic. This compensated for softness in the food-away-from-home business and distribution losses. Further, adjusted EBITDA from continuing operations rose 13.1% on productivity gains and improved channel mix.
We note that several other food companies like Flowers Foods FLO, General Mills GIS and Conagra Brands CAG are also gaining on higher coronavirus-induced demand.
Meanwhile, TreeHouse Foods is pleased with its second-quarter performance amid the coronavirus crisis. This along with expectations of continued rise in demand conditions and prudent reorganization actions prompted the company to raise guidance for 2020. Revenues are now expected toward the upper end of its previous guidance of $4.10-$4.40 billion. Additionally, adjusted earnings from continuing operations are expected in the range of $2.55-$2.75 per share compared with $2.40-$2.65 projected earlier.
Other Factors Driving TreeHouse Foods’ Performance
TreeHouse Foods has always been focused on expanding its product offerings through acquisitions. In February 2016, the company acquired Private Brands business for $2.7 billion. The Private Brands Business is a leading manufacturer of private label refrigerated and shelf stable products in the bars, bakery, cereal, condiments, pasta, and snacks categories. The addition of Private Brands boosted revenues and lowered debt. TreeHouse Foods’ other acquisitions include Flagstone Foods, PFF Capital Group, Inc. (“Protenergy”), Cains Foods, L.P., Associated Brands, and Naturally Fresh, Inc.
On the flip side, the company is committed toward exiting underperforming businesses and shifting focus toward areas with high growth potential. To this end, it completed the divestiture of the Snack business to Atlas Holdings on Aug 1, 2019. Further, TreeHouse Foods offloaded two of its in-store bakery facilities to Rich Products Corporation, which is likely to help the former focus on core growth areas.
Moreover, the company focuses on organic foods, as consumers appear to be more interested in foods labeled as “better for you,” which include fresh or freshly-prepared foods and natural, organic or specialty foods. TreeHouse Foods expects sustained growth in these areas and continues to focus on consumer’s needs by developing new formulations, packaging, and sizes.
We believe that such upsides are likely to help TreeHouse Foods keep its growth story going.
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