Why TreeHouse Foods Inc. Stock Tumbled Today

By Markets Fool.com

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Image source: TreeHouse Foods.

What happened

Shares of TreeHouse Foods Inc.(NYSE: THS) were falling today after the private-label food and beverage supplier reported third-quarter earnings, cut its profit forecast, and said it would close a plant. As of 11:10 a.m. EDT, the stock was off 20.4%.

So what

It was an all-around ugly quarter for TreeHouse, whose adjusted earnings per share fell from $0.86 a year ago to $0.70, missing estimates of $0.77. Revenue increased by 98.7%, to $1.59 billion, thanks to its acquisition earlier this year ofConAgra's private-label business, but that figure was also short of expectations of $1.64 billion. While its retail grocery segment saw a volume increase of 2.8%, volume sales fell by 3.7% at food away from home and 7.1% in industrial and export.

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CEO Sam Reed noted the discrepancy, saying that private brands fell short of expectations. Separately, the company revealed a new CFO and said it would close a Canadian facility in 2018 and downsize one in Michigan.

Now what

The company's guidance was uninspiring as it said it would lower its full-year forecast due to continuing weakness in the private-brands segment. CEO Sam Reed said he believes "this is a short-term situation" and said the company's go-to-market sales structure should help restore it to original expectations. Management now expects full-year EPS of $2.80-$2.85, well below the analyst consensus at $3.07.

The results above seem to indicate that TreeHouse is struggling to integrate the ConAgra acquisition. While it should eventually return to growth, today's plunge is well deserved.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.