TreeHouse Foods, Inc. THS reported mixed fourth-quarter fiscal 2024 results. The bottom line improved year over year but missed the Zacks Consensus Estimate, while the top line declined and beat the same. Despite a slower macroeconomic environment and two significant supply-chain disruptions, the company made steady progress in executing supply-chain initiatives amid a difficult consumer landscape across food and beverage categories.

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TreeHouse Foods is focused on driving profitability through strategic margin management, efficiency improvements and reduced capital expenditures. These initiatives aim to enhance profitability and cash flow while positioning the business for future growth.

TreeHouse Foods’ Quarterly Performance: Key Insights

TreeHouse Foods posted adjusted earnings of 95 cents per share, which lagged the Zacks Consensus Estimate of 97 cents. The bottom line increased from 77 cents per share in the year-ago quarter.

Net sales of $905.7 million dropped 0.6% year over year and beat the consensus estimate of $905 million. Net sales remained relatively stable, with strong performance in multiple categories such as pretzels, in-store bakery and cookies, boosting volume/mix. 

However, this growth was offset by lost volume resulting from the griddle product facility restoration following the related recall. Moreover, pricing adjustments in select categories, driven by commodity costs, contributed to the decline. Adjusted net sales of $911.4 million increased 0.2% year over year. 
 
In the fourth quarter, volume/mix increased 3.8%, while the impact of facilities restoration led to a 2.8% decline. Product recall returns contributed to a 0.8% decrease, pricing adjustments lowered sales by 0.7% and foreign currency effects resulted in a 0.1% reduction. All these factors resulted in a total net sales decline.

THS’ Margin & Cost Details

The gross margin of 19.5% rose 2.8 percentage points compared with the same quarter last year, primarily driven by the effective execution of supply-chain savings initiatives, a $10 million insurance recovery from the broth recall and reduced commodity costs. However, this improvement was partially offset by volume losses resulting from the griddle facility restoration following the frozen griddle product recall. Also, the adjusted gross margin improved 0.6 percentage points year over year to 19.3%.

Total operating expenses were $96.4 million, down from $109.7 million in the year-ago quarter. This reduction was primarily due to lower employee incentive compensation, the absence of a non-recurring impairment charge from the prior year, reduced severance costs and lower freight expenses. However, the decrease was partially offset by a $6.5 million reduction in TSA income due to the discontinuation of certain TSA services.

Adjusted EBITDA from continuing operations totaled $118.3 million, up from $108.4 million in the fourth quarter of 2023. This increase was driven by supply-chain savings initiatives.

TreeHouse Foods’ Financial Health Snapshot

TreeHouse Foods concluded the quarter with cash and cash equivalents of $289.6 million, long-term debt of $1.40 billion and total shareholders’ equity of $1.55 billion. In the 12 months ended Dec. 31, 2024, the company’s net cash provided by operating activities from continuing operations was $265.8 million.

THS Stock Past Three-Month Performance

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Sneak Peek Into THS’ 2025 Outlook

TreeHouse Foods provided its outlook and guidance for fiscal year 2025, expecting adjusted net sales to range between $3.34 billion and $3.40 billion, reflecting a year-over-year change between a 1% decline and 1% growth. 

This projection is influenced by an anticipated 1% decline in volume/mix, due to organic volume declines, the Harris Tea volume benefit being offset by the previously announced exit from the Ready-to-Drink business, other margin management actions and the one-time impact of the frozen griddle product recall. Pricing is expected to contribute approximately a 1% increase.

Adjusted EBITDA from continuing operations is forecasted to be between $345 million and $375 million. Capital expenditures are expected to be approximately $125 million, while free cash flow is anticipated to be at least $130 million.

What to Expect From THS in Q1?

TreeHouse Foods anticipates adjusted net sales to range between $785 million and $800 million, representing a year-over-year decline of approximately 3.5% at the midpoint. This decline is primarily due to an expected 3% decrease in volume/mix, with organic volume/mix projected to remain roughly flat. Moreover, while the Harris Tea volume benefit will provide some support, the benefits will be more than offset by the one-time impact of the frozen griddle product recall.

Adjusted EBITDA from continuing operations is expected to be between $38 million and $46 million.

This Zacks Rank #2 (Buy) stock has gained 1% in the past three months against the industry’s 4.5% decline.

Other Key Picks

Here, we have highlighted three other top-ranked stocks, namely United Natural Foods, Inc. UNFI, Freshpet Inc. FRPT and US Foods Holding Corp. USFD.

United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. It presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for UNFI's current fiscal-year earnings and sales indicates growth of 442.9% and 0.3%, respectively, from the year-ago figures. UNFI delivered a trailing four-quarter average earnings surprise of 553.1%.

Freshpet is a pet food company. It has a Zacks Rank of 2 at present.

The Zacks Consensus Estimate for Freshpet’s current financial-year earnings and sales indicates declines of 227.1% and 27.2%, respectively, from the year-ago figures. FRPT delivered a trailing four-quarter average earnings surprise of 144.5%.

US Foods is a food-service distributor. The company currently carries a Zacks Rank of 2. 

USFD delivered a trailing four-quarter earnings surprise of 2.4%, on average. The Zacks Consensus Estimate for US Foods’ current financial-year earnings and sales indicates growth of 21% and 5.3%, respectively, from the year-ago figures.

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