TreeHouse Foods, Inc. (NYSE:THS) is scheduled to report second-quarter 2019 numbers on Aug 1, before the opening bell. This manufacturer of packaged foods and beverages has a robust earnings surprise history, as its bottom line outperformed the Zacks Consensus Estimate by average of 21.6% over the trailing four quarters. In the last reported quarter, the company delivered positive earnings surprise of 18.2%. Let’s see how it is positioned ahead of the upcoming quarterly results.
Estimates Look Dull
The Zacks Consensus Estimate for its earnings for the second quarter is pegged at 29 cents, indicating a decline of 21.6% from the year-ago period. The consensus mark has remained unchanged over the past 30 days.
The consensus mark for revenues is pegged at $1,298 million, suggesting a decline of 10.8% from the year-ago quarter’s figure.
TreeHouse Foods, Inc. Price, Consensus and EPS Surprise
Factors Distressing TreeHouse Foods’ Performance
TreeHouse Foods’ earnings surprise history has been favorable. However, it has been witnessing a year-over-year decline in top and bottom lines for eight straight quarters. Revenues in the first quarter were mainly marred by SKU rationalization of low-margin businesses and the divestiture of McCann's business.
Additionally, the company has been struggling with a sluggish Snacks unit. Weakness in this unit is also weighing on TreeHouse Foods’ division direct operating income and gross margin. Troubles in the Snacks segment prompted management to announce the closure of its Snack nuts and Trail mix plant located at Minnesota. Also, declines in the Snacks and Meals Solutions business are expected to drag down the company’s upcoming quarterly performance. However, it recently inked a deal with Atlas Holdings LLC to divest its Snacks unit.
Management expects second-quarter 2019 adjusted earnings to be 25-35 cents and net sales to be $1.27-$1.31 billion. The company delivered adjusted earnings per share of 37 cents in the second quarter of 2018, wherein net sales came in at roughly $1.5 billion.
Can Strategies Offer Respite?
The company is on track with TreeHouse 2020 strategic plan, which concentrates on restructuring and realigning the business as a whole. Alongside cost savings, the initiative is expected to manage the company’s portfolio, and optimize production and supply chain. The plan aims to improve its operating margin.
Apart from these, TreeHouse is benefitting from Structure to Win program that focuses on aligning its SG&A expenses with its division structures. The company expects to maintain its solid cost control in 2019, wherein it anticipates Structure to Win plan to continue yielding. It is also focused on refining portfolio through buyouts and divestitures.
What Our Model Says
Our proven model does not conclusively show that TreeHouse Foods is likely to beat bottom-line estimates this quarter. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
TreeHouse Foods’ Earnings ESP of 0.00% combined with its Zacks Rank #4 (Sell) makes us apprehensive about an earnings beat. Markedly, we caution against sell-rated stocks (Zacks Rank #4 or 5) going into earnings announcement.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks With Favorable Combination
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post earnings beat.
General Mills, Inc. (NYSE:GIS) has an Earnings ESP of +0.97% and a Zacks Rank #2.
The Kraft Heinz (NASDAQ:KHC) Company (NYSE:K) has an Earnings ESP of +2.67% and a Zacks Rank #3.
Kellogg Company (NYSE:K) has an Earnings ESP of +0.91% and a Zacks Rank #3.
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Kellogg Company (K): Free Stock Analysis Report
TreeHouse Foods, Inc. (THS): Free Stock Analysis Report
General Mills, Inc. (GIS): Free Stock Analysis Report
The Kraft Heinz Company (KHC): Free Stock Analysis Report
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