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What's in Store for Treehouse Foods (THS) in Q2 Earnings?

Treehouse Foods, Inc. THS is slated to report second-quarter 2017 results on Aug 3, before the opening bell. Investors are keen to know whether this leading apparel retailer will be able to deliver a positive earnings surprise in the to-be-reported quarter. We note that the company’s earnings have missed the Zacks Consensus Estimate in two of the past four quarters, leading to an average negative surprise of 2.42%.

Let’s see how things are shaping up prior to this announcement.

Which Way are Estimates Trending

The Zacks Consensus Estimate for earnings in the second quarter has increased by a penny over the past thirty days to 49 cents per share, which is within the management’s guided range of 45–55 cents. The earnings estimate depicts a year-on-year decline of 9.9%.

The Zacks Consensus Estimate for earnings in fiscal 2017 has declined by 2 cents to $3.46 in the past 30 days, which is below the management’s expected range of $3.50–$3.70.

Further, the analysts polled by Zacks expect revenues of $1.54 million for the said quarter, almost in line with the year-ago sales.

What Does the Zacks Model Unveil?

Our proven model does not conclusively show that Treehouse Foods is likely to beat earnings estimates this quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP  Filter.

Treehouse Foods has an Earnings ESP of +2.04%, as the Most Accurate Estimate of 50 cents is pegged higher than the Zacks Consensus Estimate of 49 cents. However, the company carries a Zacks Rank #4 (Sell).

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Treehouse Foods, Inc. Price, Consensus and EPS Surprise

 

Factors at Play

We note that the company is in a transitional phase and is looking to offload low-margin and ineffective businesses in order to streamline its operations, meet the needs of its customers and eliminate excess manufacturing capacity. The company exited some low margin but relatively high-volume businesses in the first quarter that had led to a year-over-year decline in volumes, including the partial closure of Battle Creek and ceased production at its Ayer and Azusa manufacturing facilities. These impacted sales and led to a decrease of over 16 million pounds in the first quarter compared to the year-ago period.

Further, overall weakness in the food industry has been hurting the numbers since the beginning of the year. The company also incurred higher spending in regard to its business structure realignment. Unfavorable pricing, inflationary pressure, higher operating expenses also added to the concerns. Such challenges have led the company to issue a soft guidance for the second quarter, which, in terms of earnings, is anticipated to be the lowest in 2017.

The company’s shares have also underperformed the broader Consumer Staples sector over the past one year. Treehouse’s shares have declined 17.3% while the sector depicted growth of 1.9%.

Nevertheless, in an effort to achieve growth, the company continues with its Private Brands’ integration and revised organizational structure to focus more on organic foods. However, these initiatives are yet to yield positive and significant impacts upon the performance of the company.

Still Interested in Consumer Staples Stocks? Check these

Here are some companies in the Consumer Staple sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat.

Inter Parfums, Inc. IPAR has an Earnings ESP of +5.56% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kellogg Company K has an Earnings ESP of +2.17% and carries a Zacks Rank #2.

Nu Skin Enterprises, Inc. NUS has an Earnings ESP of +2.86% and carries a Zacks Rank #2.

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Inter Parfums, Inc. (IPAR): Free Stock Analysis Report
 
Nu Skin Enterprises, Inc. (NUS): Free Stock Analysis Report
 
Kellogg Company (K): Free Stock Analysis Report
 
Treehouse Foods, Inc. (THS): Free Stock Analysis Report
 
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