TreeHouse Earnings: Shares Fall to Our Fair Value Estimate After Difficult but Expected Period

We don’t expect to make a major change to our $34 fair value estimate for no-moat TreeHouse Foods following its first-quarter earnings release. Results weren’t great, with sales down 4% from the prior year to $821 million and adjusted EBITDA margin contracting 510 basis points to 5.6%. However, this was largely close to management’s first-quarter guidance. As such, the company maintained its full-year guidance for sales of $3.43 billion-$3.5 billion and adjusted EBITDA of $360 million-$390 million. This compares with our earlier estimates of $3.47 billion and $379 million, respectively. Shares fell 7% on earnings, near our fair value estimate. We see a better opportunity in narrow-moat General Mills (trading 11% below fair value), as we think the market undervalues the upside of its branded portfolio.