TreeHouse Foods, Inc. THS is facing significant challenges as weak consumer demand and operational disruptions continue to hinder its growth. Over the past three months, the company’s stock has dropped 18.5%, underperforming the industry’s decline of 10.2%. In addition, it has lagged behind the Zacks Consumer Staples sector, which fell 7.8%, and the S&P 500, which posted 3.9% growth during the same period. This decline highlights the difficulties the company is grappling with in the current market environment.

THS’ Declining Sales Amid Slowing Consumer Trends

TreeHouse Foods is operating amid a dynamic environment characterized by challenging consumer trends, slower category growth and operational disruptions. These factors persisted in the third quarter of fiscal 2024, wherein net sales of $839.1 million dropped 2.8% due to a voluntary recall of frozen griddle products and unfavorable volume/mix performance. Organic sales decreased 2.7%, with softness driven by slowing consumer consumption trends across key categories.

TreeHouse Foods’ Struggling Private Brand Unit

Although private brand unit sales were positive during the third quarter of 2024, there was a notable deceleration as the quarter progressed. This reflects sustained consumer pressure and broad market challenges. The softness persisted into October, with expectations for these trends to continue in the near term. A shrinking market for private brands, despite their historical growth trajectory, raises concerns about the company’s ability to sustain revenue growth.

THS's Price Performance

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THS’ Road Ahead Looks Challenging

Thanks to softer consumer demand and a voluntary recall of frozen griddle products, TreeHouse Foods recently lowered its 2024 adjusted net sales and adjusted EBITDA guidance. Management expects full-year adjusted net sales of $3.37-$3.4 billion, which indicates a decline of 2% to 1% from the reported level in 2023. This forecast is revised from the previous guidance of $3.43-$3.5 billion, implying a flat to a 2% increase. Adjusted net sales for the fourth quarter are projected to be between $900 million and $930 million, indicating a decline of 2% to 1% year over year.

The company revised its 2024 adjusted EBITDA guidance downward in the range of $335-$345 million compared with $360-$380 million projected earlier in 2024. This revision implies weakening consumption trends and a softer mix, leading to supply chain deleverage, along with the anticipated impact of the voluntary griddle recall.

TreeHouse Foods' Investment Strategy

Given TreeHouse Foods' ongoing challenges with weak consumer demand and operational disruptions, its outlook remains bleak. The company’s lowered 2024 guidance signals that growth will continue to be hampered in the near term. With a Zacks Rank of 5 (Strong Sell), investors should approach THS cautiously, as the company faces a difficult path to recovery. Those holding the stock may consider reassessing their positions in light of these headwinds.

Solid Staple Bets

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely Ingredion Incorporated INGR, Freshpet FRPT and US Foods Holding Corp. USFD.

Ingredion Incorporated manufactures and sells sweeteners, starches, nutrition ingredients and biomaterial solutions derived from wet milling and processing corn and other starch-based materials. The company currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

INGR has a trailing four-quarter earnings surprise of 9.5%, on average. The Zacks Consensus Estimate for Ingredion’s current financial year’s earnings indicates growth of 12.4% from the year-ago reported number.

Freshpet, a pet food company, presently carries a Zacks Rank #2. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.3% and 228.6%, respectively, from the year-ago period’s reported figure.

US Foods, together with its subsidiaries, engages in the marketing, sale and distribution of fresh, frozen and dry food and non-food products to food service customers in the United States. It currently carries a Zacks Rank #2. USFD delivered a negative earnings surprise of 0.4% in the last reported quarter.

The Zacks Consensus Estimate for US Foods Holding’s current fiscal-year sales and earnings indicates growth of 6.4% and 18.6%, respectively, from the prior-year reported levels.

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Freshpet, Inc. (FRPT) : Free Stock Analysis Report

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