uploads/2016/06/pf-pm.png

Why Did Pinnacle Foods Recall Some of Its Products?

By

Updated

Price movement 

Pinnacle Foods (PF) has a market cap of $5.1 billion. It fell by 0.45% to close at $43.79 per share on June 17, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -0.46%, 4.6%, and 4.4%, respectively, that day. This means that PF is trading 2.4% above its 20-day moving average, 1.7% above its 50-day moving average, and 2.6% above its 200-day moving average.

Article continues below advertisement

Related ETF and peers

The PowerShares DWA Consumer Staples Momentum Portfolio ETF (PSL) invests 1.4% of its holdings in Pinnacle Foods. The ETF tracks an index of US consumer cyclical companies, selected and weighted by price momentum. The YTD price movement of PSL was -0.44% on June 17, 2016.

The market caps of Pinnacle Foods’ competitors are as follows:

  • Mondelēz International (MDLZ): $68.7 billion
  • General Mills (GIS): $39.1 billion
  • ConAgra Foods (CAG): $20.5 billion

Pinnacle Foods recalls some products

Pinnacle Foods has voluntarily recalled a limited number of C&W Early Harvest Petite Peas and C&W Petite Peas that may contain Listeria monocytogenes. According to the FDA, “Listeria Monocytogenes is an organism, which can cause serious and sometimes fatal infections in young children, frail or elderly people and other with weakened immune systems. Although healthy individuals may suffer only short-term symptom such as high fever, severe headache, stiffness, nausea, abdominal pain and diarrhea, Listeria can cause miscarriages and stillbirths among pregnant women.”

Article continues below advertisement

Performance of Pinnacle Foods in fiscal 1Q16

Pinnacle Foods reported fiscal 1Q16 net sales of $754.3 million, a rise of 13.4% over the net sales of $665.3 million in fiscal 1Q15.

Its net income and EPS (earnings per share) fell to $24.8 million and $0.21, respectively, in fiscal 1Q16, compared with $41.5 million and $0.35 in fiscal 1Q15. It reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $105.2 million in fiscal 1Q16, a fall of 3.8% from fiscal 1Q15.

Between fiscals 4Q15 and 1Q16, Pinnacle Foods’ cash and cash equivalents fell by 54.9% and its inventories rose by 10.2%. In 1Q16, its current ratio fell to 1.9x and its debt-to-equity ratio rose to 2.6x, compared with 2.1x and 2.0x, respectively, in fiscal 4Q15.

Projections

The company has reaffirmed its projections for fiscal 2016:

  • adjusted EPS in the range of $2.08 to $2.13, which includes ~$0.05 from the Boulder Brands acquisition
  • input cost inflation in the range of 2% to 3%
  • interest expenses of ~$140 million
  • effective tax rate of slightly above 36.6%
  • capital expenditure in the range of $135 million to $145 million, which includes ~$30 million for the Gardein capacity expansion

In the next part of this series, we’ll discuss General Mills.

Advertisement

More From Market Realist