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Treehouse Foods Inc THS

Morningstar Rating
$35.18 −0.02 (0.06%)
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Company Report

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.

Price vs Fair Value

THS is trading at a 755% premium.
Price
$35.20
Fair Value
$25.00
Uncertainty
High
1-Star Price
$25.90
5-Star Price
$73.10
Economic Moat
Hmcds
Capital Allocation
Zkspldhm

Bulls Say, Bears Say

Bulls

The continued store expansion of grocers with high private-brand penetration like Trader Joe’s, Costco, and Aldi should provide a tailwind for industry growth.

Bears

With just one third of sales coming from multiyear contracts and the lack of switching costs in the industry, TreeHouse faces significant potential volatility to the top line.

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News

Trading Information

Previous Close Price
$35.20
Day Range
$34.9335.32
52-Week Range
$33.2854.52
Bid/Ask
$34.87 / $35.41
Market Cap
$1.85 Bil
Volume/Avg
506,370 / 524,141

Key Statistics

Price/Earnings (Normalized)
20.40
Price/Sales
0.57
Dividend Yield (Trailing)
Dividend Yield (Forward)
Total Yield
5.35%

Company Profile

TreeHouse Foods is the largest pure-play private-label manufacturer in the US. Much larger in the past following the 2016 acquisition of Ralcorp, Conagra’s former private-label business, the company has since divested several businesses to focus on high-growth categories. At present, the company produces and sells snacks (crackers, pretzels, cookies, and so on), beverages and drink mixes (such as nondairy creamer, coffee, tea), and a select number of grocery products (pickles, refrigerated dough, hot cereal, cheese, and pudding). Its most important sales channel is through retail grocery stores that sell its products under their own brands, with co-manufacturing and food away from home as much smaller channels of distribution for its fare.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Small Core
Total Number of Employees
7,400

Competitors

Valuation

Metric
THS
CAG
GIS
Price/Earnings (Normalized)
20.4011.3014.75
Price/Book Value
1.161.584.09
Price/Sales
0.571.201.98
Price/Cash Flow
9.217.8512.24
Price/Earnings
THS
CAG
GIS

Financial Strength

Metric
THS
CAG
GIS
Quick Ratio
0.580.290.33
Current Ratio
1.520.950.66
Interest Coverage
1.143.357.70
Quick Ratio
THS
CAG
GIS

Profitability

Metric
THS
CAG
GIS
Return on Assets (Normalized)
2.31%5.79%8.71%
Return on Equity (Normalized)
5.78%14.39%27.32%
Return on Invested Capital (Normalized)
3.78%8.83%13.78%
Return on Assets
THS
CAG
GIS
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Packaged Foods Industry Comparables

Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
NSRGY
Nestle SA ADRBgkzvlryLmrw$264.6 Bil
KHC
The Kraft Heinz CoLgmvqktDdgy$43.5 Bil
DANOY
Danone SA ADRJzlqzyjvhDmyjg$41.4 Bil
GIS
General Mills IncLwrqqhlzvBxfgm$38.6 Bil
K
Kellanova CoGghwjjvkBsdkqrx$20.3 Bil
MKC
McCormick & Co Inc Registered Shs Non VtgTwjkfpfhqGwrx$19.4 Bil
HRL
Hormel Foods CorpWbrsznjqzBjspc$19.0 Bil
CAG
Conagra Brands IncYjsykjbqYfvc$14.5 Bil
CPB
Campbell Soup CoKppfgnrqpSgfm$13.2 Bil
LW
Lamb Weston Holdings IncGblgfwdyWsgljz$12.9 Bil

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