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Bank of America/Merrill Lynch Downgrades TreeHouse Foods

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Price movement

TreeHouse Foods (THS) has a market cap of $4.9 billion. It fell 1.2% to close at $68.88 per share on November 4, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -21.7%, -21.2%, and -12.2%, respectively, on the same day.

THS is trading 20.4% below its 20-day moving average, 22.0% below its 50-day moving average, and 23.8% below its 200-day moving average.

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Related ETF and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.40% 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 3.5% on November 4.

The market caps of TreeHouse Foods’s competitors are as follows:

  • J.M. Smucker (SJM) — $15.1 billion
  • Post Holdings (POST) — $5.0 billion
  • B&G Foods (BGS) — $2.8 billion

TreeHouse Foods’s rating

On November 4, 2016, Bank of America/Merrill Lynch has downgraded TreeHouse Foods’s rating to “underperform” from “buy.”

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Performance of TreeHouse Foods in 3Q16

TreeHouse Foods reported 3Q16 net sales of $1.6 billion, a rise of 98.7% compared to net sales of $798.6 million in 3Q15. Sales from North American Retail Grocery, Food Away from Home, and Industrial and Export segments rose 118.5%, 66.4%, and 16.2%, respectively, in 3Q16 compared to 3Q15.

The company’s gross profit margin and operating margin fell 190 basis points and 290 basis points, respectively, in 3Q16 compared to 3Q15. It reported adjusted EBITDA[1. earnings before interest, tax, depreciation, and amortization] of $169.5 million in 3Q16, a rise of 69.8% compared to 3Q15.

Its net income rose to $37.2 million in 3Q16 compared to $28.4 million in 3Q15. It reported EPS (earnings per share) of $0.65 in 3Q16 and 3Q15. It reported adjusted EPS of $0.70 in 3Q16, a fall of 18.6% compared to 3Q15.

Projections

The company expects adjusted EPS in the range of $1.07–$1.12 per share for fiscal 4Q16. It expects adjusted EPS in the range of $2.80–$2.85 per share for fiscal 2016.

In the next part, we’ll look at Fossil Group (FOSL).

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