BMO Capital Upgraded Pinnacle Foods to ‘Outperform’

Pinnacle Foods (PF) has a market cap of $5.2 billion. After BMO Capital upgraded the stock to “outperform,” it rose by 4.0% to close at $44.69 per share as of January 11, 2016. The price movement on a weekly, monthly, and YTD (year-to-date) basis is 5.8%, 3.8%, and 5.3%, respectively.

At times, the stock broke the support of all the moving day averages. Currently, Pinnacle Foods is trading 5.5% above its 20-day moving average, 5.2% above its 50-day moving average, and 4.2% above its 200-day moving average.

The PowerShares DWA Consumer Staples Momentum Portfolio (PSL) invests 2.3% of its holdings in Pinnacle Foods. PSL tracks an index of US consumer cyclical firms selected and weighted by price momentum. PSL’s YTD price movement is -3.6% as of January 8, 2016.

Pinnacle Foods’ competitors and their market caps are:

• Mondelez International (MDLZ) – $69.9 billion
• General Mills (GIS) – $33.7 billion
• ConAgra Foods (CAG) – $18.1 billion

BMO Capital upgraded Pinnacle Foods from “market perform” to “outperform.” It set the price target at $50 from $42 per share due to the acquisition of Boulder Brands and positive guidance for fiscal 2015.

Pinnacle Foods reported fiscal 3Q15 net sales of $636.3 million—a rise of 2.0% compared to net sales of $624.0 million in fiscal 3Q14. It reported an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $122.1 million in fiscal 3Q15. Its net income and EPS (earnings per share) fell to $48.1 million and $0.41, respectively, in fiscal 3Q15—compared to its net income and EPS of $136.0 million and $1.16, respectively, in fiscal 3Q14.

Meanwhile, its cash and cash equivalents and inventories rose by 36.7% and 21.8%, respectively, on a quarterly basis in fiscal 3Q15. Its DE (debt-to-equity) ratio rose to 1.99 in fiscal 3Q15—compared to its DE ratio of 1.97 in fiscal 3Q14.

Pinnacle Foods’ PE (price-to-earnings) and PBV (price-to-book value) ratios are 30.8x and 3.0x, respectively, as of January 11, 2016.

The company projected an adjusted EPS of $1.89–$1.91 for fiscal 2015.