Skip to Content

Treehouse Foods Inc THS

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

No-Moat Treehouse Foods Releases Tepid Financial Results; Shares Remain Appetizing for Investors

Analyst Note

| Rebecca Scheuneman, CFA |

No-moat Treehouse Foods failed to impress after releasing mixed results for its third quarter. Sales for the quarter registered $1.1 billion, tracking our full-year revenue forecast of $4.34 billion. Revenue growth was 5.3% (1.7% on an organic basis) compared with last year, which is mainly driven by the 3% price increase on much of the portfolio. The price hikes were instituted to counteract worse-than-expected inflation, as management noted that higher input prices now pose a roughly $230 million hit to annual gross profits from $105 million previously (to a 54-basis-point hit from 24). This pressure led to a gross margin of only 16.3%, which pales in comparison with 18% in same period last year and our full-year estimate of 18.2%. Management implemented additional price increases that should reach 5% by year-end, and normally we would be skeptical that the firm (which we consider no-moat, and thus no brand loyalty or pricing power) could successfully pull this off. However, as inflation is widespread, with most players raising prices, we contend that management will be successful in this endeavor.

Read Full Analysis

Company Profile

Business Description

Treehouse Foods, the largest private label manufacturer in the U.S., is the product of a slew of acquisitions, the most significant being the 2016 acquisition of Ralcorp, Conagra’s former private brands business. The firm plays in over 25 categories, including snacks like pretzels and cookies, meals like pasta and dry dinners, and single-serve beverages like pods and ready-to-drink coffee. Retailers represent its most significant end-market, where it sells products for resale under retailer brands, but it also serves foodservice customers (providing a similar service as its retail business), industrial (selling bulk food for repackaging and repurposing), and branded consumer goods firms (under co-packing arrangements). Over 90% of its revenue comes from the U.S.

Contact
2021 Spring Road, Suite 600
Oak Brook, IL, 60523
T +1 708 483-1300
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Slow Growth
Employees 10,900