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UBS Upgrades Pinnacle Foods to a ‘Buy’

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Nov. 21 2016, Updated 5:04 p.m. ET

Price movement

Pinnacle Foods (PF) rose 4.2% to close at $49.81 per share in the third week of November 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 4.2%, -2.5%, and 19.4%, respectively, as of November 18.

PF is trading 1.1% below its 20-day moving average, 0.81% below its 50-day moving average, and 7.6% above its 200-day moving average.

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Related ETF and peers

The PowerShares DWA Consumer Staples Momentum ETF (PSL) invests 3.5% of its holdings in Pinnacle Foods. The YTD price movement of PSL was -5.3% on November 18.

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

  • Mondelez International (MDLZ): $66.4 billion
  • General Mills (GIS): $36.3 billion
  • ConAgra Foods (CAG): $16.2 billion

Pinnacle Foods’ rating

On November 14, 2016, UBS upgraded Pinnacle Foods’ rating to “buy” from “neutral” and set the stock’s price target at $54 per share.

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Performance of Pinnacle Foods in fiscal 3Q16

Pinnacle Foods reported fiscal 3Q16 net sales of $758.8 million, a rise of 19.3% compared to net sales of $636.3 million in fiscal 3Q15. The rise in net sales was due to the acquisition of Boulder Brands and a rise in the net price realization and volume and mix.

The company’s gross profit margin and EBIT (earnings before interest and taxes) margin expanded 230 basis points and 20 basis points, respectively, in fiscal 3Q16 compared to the prior year’s period.

Its net income and EPS (earnings per share) rose to $52.4 million and $0.44, respectively, in fiscal 3Q16 compared to $48.1 million and $0.41, respectively, in fiscal 3Q15. It reported adjusted EPS of $0.53 in fiscal 3Q16, a rise of 15.2% compared to fiscal 3Q15.

Pinnacle Foods’ cash and cash equivalents fell 8.6%. Its inventories rose 24.6% in fiscal 3Q16 compared to fiscal 4Q15.

Projections

The company has made the following projections for fiscal 2016:

  • adjusted EPS of $2.13–$2.15, which includes $0.08–$0.09 from the Boulder Brands acquisition
  • input cost inflation of 2.0%–2.5%
  • interest expense of ~$140.0 million
  • capital expenditure of $110.0 million–$120.0 million

Next, let’s take a look at Energizer Holdings (ENR).

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