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TreeHouse Foods Recall and Its Business with Amazon

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Price movement of TreeHouse Foods

TreeHouse Foods (THS) fell by 1.3% to close at $90.67 per share at the end of the third week of May 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -1.3%, 4.5%, and 15.6%, respectively. This means that THS is trading 0.83% above its 20-day moving average, 3.2% above its 50-day moving average, and 9.8% above its 200-day moving average.

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Related ETF and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.20% of its holdings in TreeHouse Foods. The ETF tracks a market-cap-weighted index of growth companies culled from the S&P 400. The YTD price movement of IVOG was 2.3% as of May 20, 2016.

The market cap of TreeHouse Foods’ competitors are as follows:

  • B&G Foods (BGS): $2.7 billion
  • JM Smucker (SJM): $15.2 billion
  • Post Holdings (POST): $4.7 billion

TreeHouse recalled its products

TreeHouse Foods has voluntarily recalled its products that contain sunflower kernels that may be contaminated with Listeria monocytogenes (L.mono).

According to a company press release on May 19, 2016, “L.mono is an organism, which can cause serious and sometimes fatal infections in young children, frail or elderly people, and others with weakened immune systems. Listeria infection can cause miscarriages and stillbirths among pregnant women.”

The company has taken this initiative to protect the public health. It’s working with the FDA (U.S. Food and Drug Administration) to investigate the problem.

In other news, Amazon (AMZN) announced the expansion of its private-label brands. It’s working with TreeHouse Foods, a manufacturer of packaged foods and beverages, under private-label brands to manufacture its own private-label brands.

TheStreet Ratings has rated TreeHouse Foods a “buy” with a “B” rating.

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Performance in fiscal 1Q16

TreeHouse Foods reported fiscal 1Q16 net sales of $1.3 billion, a rise of 62.2% compared to net sales of $7.8 billion in fiscal 1Q15. Sales from the North American retail grocery, food away from home, and industrial and export segments rose by 72.1%, 27.5%, and 34.9%, respectively, in fiscal 1Q16 compared to fiscal 1Q15.

The company’s cost of sales as a percentage of net sales rose by 2.5%, and its operating income fell by 59.5% in fiscal 1Q16 compared to the same period last year. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.3 billion in fiscal 1Q16, a rise of 48.2% compared to fiscal 1Q15.

Its net income and EPS (earnings per share) fell to -$3.3 million and -$0.06, respectively, in fiscal 1Q16 compared to $17.9 million and $0.41, respectively, in fiscal 1Q15. It reported adjusted EPS of $0.48 in fiscal 1Q16, a fall of 18.6% compared to fiscal 1Q15.

Projections

The company expects adjusted EPS of $0.50–$0.55 per share for fiscal 2Q16. It also expects adjusted EPS of $3.00–$3.10 per share for fiscal 2016.

In the next part, we’ll take a look at Coach.

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