Pinnacle Foods (PF) Reiterates 2016 Earnings Guidance

Pinnacle Foods, Inc. (NYSE:PF) recently re-affirmed its earnings guidance for 2016. This food company continues to expect its adjusted earnings in the range of $2.08 to $2.13 per share.

The company had provided its 2016 guidance along with its first quarter 2016 results, reported on Apr 28. While earnings matched the Zacks Consensus Estimate, revenues missed the same.

Adjusted earnings of 40 cents per share came in line with the Zacks Consensus Estimate and grew 2.6% from the year-ago period. The upside was supported by double-digit sales growth, improved gross profits through effective productivity programs and favorable productivity mix.

Net sales of this food company increased 13.4% to $754.3 million in the first quarter. The improvement was driven by a 15.2% benefit from the Boulder Brands acquisition (completed in January) and higher net price realization of 0.1%, partially offset by lower volume/mix of 1.7% and unfavorable foreign currency translation of 0.2%. Sales missed the Zacks Consensus Estimate of $771 million by 2.2%.

The company witnessed decline in both North America Retail, which comprises the Birds Eye Frozen and Duncan Hines Grocery segments and The Specialty Foods segment.

In 2016, Pinnacle Foods expects gains from the Boulder Brands acquisition. The earnings guidance of $2.08 to $2.13 includes approximately 5 cents from the Boulder Brands acquisition, while it would contribute about $460 million to $480 million to net sales.

Apart from this, the company expects input cost inflation in a range of 2% to 3%. Second half inflation is expected to be higher than the first half. Productivity savings are estimated in a range of 3.5% to 4% of costs, including Boulder Brands' organic cost savings but excluding synergies. Second half productivity is expected to be higher than the first half.

Currency is expected to be less of a headwind in 2016, with the impact estimated at about 1 cent.

Overall, the company boasts a strong brand portfolio and intends to continue to invest in innovation to further differentiate its brands in the marketplace. It has also been pursuing various acquisitions over the years to enhance distribution network, customer base and long-term growth.

Pinnacle Foods also has an operational excellence program to generate annual productivity savings across the supply chain. The company has raised its savings target in 2016 to a range of 3.5% to 4% of annual cost of products sold, compared with 3% to 4%, which has been achieved over the last five years. These productivity savings, along with higher pricing, have been mitigating the impact of input cost inflation to drive gross margin.

Pinnacle Foods carries a Zacks Rank #3 (Hold).

Key Picks from the Sector

Investors interested in the food industry can also consider stocks like B&G Foods, Inc. (NYSE:BGS) , Post Holdings, Inc. (NYSE:POST) and Lancaster Colony Corporation (NASDAQ:LANC) . All of them hold a Zacks Rank #1 (Strong Buy).