The consumer staples sector, known for its resilience, often acts as a safe haven during market volatility. However, not all stocks in this sector perform at the same level. TreeHouse Foods, Inc. THS, a key player in the private-label food and beverage space, occupies a strategic position within this resilient sector. However, despite its focus on value-driven offerings and adaptability to evolving consumer preferences, the company faces its own set of challenges in an increasingly competitive landscape.
The company is navigating a challenging landscape marked by shifting consumer consumption patterns, slower category growth and operational disruptions. These headwinds became evident in TreeHouse Foods’ third-quarter 2024 results, where the company reported a 2.8% decline in net sales to $839.1 million. This drop was primarily driven by a voluntary recall of frozen griddle products and weaker volume/mix performance. Organic sales also saw a 2.7% decline, reflecting softness across key product categories.
TreeHouse Foods’ private brand unit experienced a notable slowdown during the third quarter. While unit sales remained positive, the pace decelerated as the quarter progressed, signaling sustained pressure on consumers and broader market challenges. A shrinking private label market raises concerns about the company’s ability to maintain its growth trajectory.
In response to weaker consumer demand and the impact of the frozen griddle product recall, TreeHouse Foods revised its fiscal 2024 guidance downward on its most recent earnings call. Management now expects adjusted net sales to range between $3.37 billion and $3.4 billion, indicating a year-over-year decline of 1% to 2%. This is a downward revision from the earlier forecast of $3.43 billion to $3.5 billion, which had implied flat to 2% growth. Similarly, the adjusted EBITDA forecast was lowered to a range of $335 million to $345 million compared to the prior estimate of $360 million to $380 million. These adjustments highlight the impact of weakening consumption trends, a softer product mix, and ongoing supply chain inefficiencies.
Shares of this Zacks Rank #5 (Strong Sell) company have declined 11.9% in the past three months compared with the Consumer Staples sector’s decline of 6.1%.
Despite facing several challenges, TreeHouse Foods is making strategic moves aimed at delivering long-term results. By leveraging its supply chain efficiencies, refining its product portfolio, and focusing on high-growth categories, the company is building a strong foundation for sustainable growth. With initiatives like the TreeHouse Management Operating System, TreeHouse Foods is enhancing operational performance and driving margin improvements. The acquisition of Harris Tea strategically leverages TreeHouse Foods’ balance sheet strength, adding a fast-growing, high-margin business that enhances its leadership in the private-label tea sector. These efforts position the company to navigate current market challenges while laying the groundwork for future success.
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For investors seeking growth and resilience, there are better options in the consumer staples space. Companies with established global brands, strategic expansions and innovative product lines are well-equipped to outperform. Let’s explore four compelling stocks that offer stronger growth prospects and a more balanced approach than TreeHouse Foods.
United Natural Foods, Inc. UNFI emerges as a compelling investment choice due to its balanced approach to revenue growth and cost management. The company’s strategic initiatives, such as expanding its customer base, optimizing its distribution network, and investing in automation, have enhanced efficiency and market penetration. United Natural Foods continues to benefit from rising consumer demand for healthier and more sustainable products, with its natural and organic segments delivering robust growth.
UNFI distributes natural, organic, specialty, produce, and conventional grocery and non-food products in the United States and Canada. UNFI has a trailing four-quarter earnings surprise of 553.1%, on average. The Zacks Consensus Estimate for United Natural Foods’ current financial-year sales and earnings per share (EPS) suggests growth of 0.3% and 442.9%, respectively, from the year-ago period. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Tyson Foods, Inc. TSN leverages a diversified protein portfolio, which enables the company to effectively navigate market fluctuations. The company aims to expand its global presence by enhancing capacity utilization and tailoring operations to meet regional market demands, thereby broadening its growth opportunities. Tyson Foods’ multi-channel, multi-protein strategy is key to its long-term resilience and growth, positioning the company to capitalize on emerging market opportunities as they arise.
TSN operates as a food company worldwide. It operates through four segments: Beef, Pork, Chicken, and Prepared Foods. The Zacks Consensus Estimate for Tyson Foods’ current financial-year sales and EPS suggests growth of 2% and 13.2%, respectively, from the year-ago reported figures. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 57%, on average.
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Pilgrim’s Pride Corporation PPC focuses on key customers to refine its portfolio and gain a competitive edge. Its innovative approach has driven growth, supported by substantial investments in expansion and operational efficiencies. The company is committed to seizing growth opportunities, having made significant investments in its facilities to meet both growth targets and the specific needs of its key customers.
PPC produces, processes, markets, and distributes fresh, frozen, and value-added chicken and pork products to retailers, distributors and foodservice operators. The Zacks Consensus Estimate for Pilgrim’s Pride’s current financial-year EPS suggests growth of 203% from the year-ago reported figures. This Zacks Rank #1 company has a trailing four-quarter earnings surprise of 30.9%, on average.
Freshpet, Inc. FRPT emphasizes capacity expansion through three key drivers: maximizing throughput on existing production lines, optimizing capacity at current facilities, and leveraging new technologies to enhance efficiency. The company’s operational performance has also shown remarkable progress, with key improvements in throughput, yield and logistics costs.
FPRT manufactures, distributes, and markets natural fresh meals and treats for dogs and cats in the United States, Canada and Europe. The Zacks Consensus Estimate for Freshpet’s current financial-year sales and EPS suggests growth of 27.2% and 228.6%, respectively, from the year-ago reported figures. This Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 144.5%, on average.
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Tyson Foods, Inc. (TSN) : Free Stock Analysis Report
Freshpet, Inc. (FRPT) : Free Stock Analysis Report
Pilgrim’s Pride Corporation (PPC) : Free Stock Analysis Report
United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
TreeHouse Foods, Inc. (THS) : Free Stock Analysis Report
