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Summary

  • TreeHouse Foods beat earnings and revenues estimates for Q2.
  • The company guided higher on full-year EPS, and keeps my bullish thesis intact.
  • The cost savings I talked about are boosting margins and driving bottom-line growth, while acquisitions continue to drive the top-line.

TreeHouse Foods (NYSE:THS) reported Q2 EPS of $0.84. This beat estimates by one penny and the $0.65 TreeHouse Foods earned last year. Revenues grew 19.3% y/y to $627.96 million, which beat expectations by $12.32 million. The big increase is due to acquisitions and favorable volume/mix in each operating segment. Adjusted EBITDA increased 19.4% as well, to $87.2 million. Gross margins increased from 20.8% last year to 21.6%. Margins increased as a result of restructuring its operations and implementing cost-saving measures.

The highlight of the quarter was that TreeHouse Foods developed a new K-cup that works with both existing and next-generation Keurig Green Mountain (NASDAQ:GMCR) machines. Back in February, my article talked about how TreeHouse Foods had sued Keurig Green Mountain for anti-competitive behavior. Keurig Green Mountain had sought to shut private-label makers like TreeHouse Foods from capitalizing and selling K-cups for its latest machines. The good news is that TreeHouse Foods will go into commercial production later this year, and its lawsuit against Keurig Green Mountain is still ongoing. I still see a lot of merit in the lawsuit against Keurig Green Mountain, and expect the outcome to be favorable for TreeHouse Foods.

Looking ahead, TreeHouse Foods raised its full-year guidance to earn $3.60 to $3.75 per share this year. My forecast had called for $3.65 a share this year. I think the company will likely come in closer to the $3.75 per share number now. This comes as TreeHouse Foods just completed the acquisitions of Protenergy Natural Foods and Flagstone Foods. Both acquisitions are immediately accretive to earnings. With shares up about 15% since February, I still see further upside ahead.

Source: Update: TreeHouse Foods Earnings

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