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J.P. Morgan Rated Pinnacle Foods as ‘Overweight’

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Price movement

Pinnacle Foods (PF) has a market cap of $6.0 billion. It rose 0.85% to close at $50.94 per share on December 15, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were -0.59%, 5.0%, and 22.1%, respectively, on the same day.

PF is trading 1.7% above its 20-day moving average, 1.3% above its 50-day moving average, and 8.1% above its 200-day moving average.

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Related ETF and peers

The PowerShares DWA Consumer Staples Momentum Portfolio ETF (PSL) invests 3.5% of its holdings in Pinnacle Foods. The YTD price movement of PSL was -4.3% on December 15.

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

  • Mondelez International (MDLZ) — $69.6 billion
  • General Mills (GIS) — $37.7 billion
  • ConAgra Foods (CAG) — $16.9 billion

PF’s rating

On December 15, 2016, J.P. Morgan initiated the coverage of Pinnacle Foods with an “overweight” rating and also set the stock’s price target at $58.00 per share.

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Performance of Pinnacle Foods in fiscal 3Q16

Pinnacle Foods (PF) 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 net price realization and volume and mix.

The company’s gross profit margin and EBIT[1. earnings before interest and tax] margin expanded 230 basis points and 20 basis points, respectively, in fiscal 3Q16 compared to fiscal 3Q15.

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’s cash and cash equivalents fell 8.6%, and its inventories rose 24.6% in fiscal 3Q16 compared to fiscal 4Q15.

Quarterly dividend

Pinnacle Foods declared a quarterly cash dividend of ~$0.29 per share on its common stock. The dividend will be paid on January 10, 2017, to shareholders of record at the close of business on December 20, 2016.

Projections

Pinnacle Foods 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 General Mills (GIS).

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