Acquisitions & Innovation Fuel Pinnacle Foods’ Market Growth
Pinnacle Foods Inc. PF has been gaining from robust in-market consumption, courtesy of lucrative buyouts and innovations. This has also strengthened the Frozen and Boulder segments. Moreover, the sturdy market performance combined with other strategic growth-oriented initiatives led management to provide an encouraging view for 2018.
Well, such factors were more than enough to drive investors’ optimism, evident from the stock’s 21.4% improvement in the past six months compared with the industry’s rise of 0.2%. Let’s take a closer look into the factors aiding the company’s growth.
Factors Aiding Market Growth
Pinnacle Foods’ in-market performance has been strong for quite some time. This is mainly attributable to the company’s well-chalked acquisitions. In fact, the acquisition of Boulder Brands, completed in January 2016, provided the company a new growth platform in refrigerated foods and added iconic brands such as Udi’s, Glutino, Smart Balance as well as EVOL to the portfolio. In 2017, the company gained synergies of $16 million from the Boulder acquisition and expects to continue benefitting from residual synergies. Other notable acquisitions of Pinnacle Foods include Duncan Hines’ manufacturing business, Garden Protein and the Wish-Bone salad dressings business, which have been profitable.
Moving on, the company’s Frozen segment, which has also been depicting strong in-market performance, has been gaining from the popularity of the Birds Eye line. Strong sea food business has also been aiding growth in this segment.
Additionally, the company’s market performance gains from a diverse portfolio of iconic food brands that enjoy strong household penetration in the United States. Pinnacle Foods has also been undertaking innovations to maintain market share. Some noteworthy innovations in the past include new varieties of the Duncan Hines Decadent, Duncan Hines Perfect Size baking kits, Birds Eye product lines and Vlasic purely pickles. For 2018, Management plans to roll out new products under the Birds Eye brand and will also expand its Hungry-Man Handful line. Management is also planning exciting innovations for its gardein and Evol brands. Additionally, the company announced a partnership with VaynerMedia to further augment brand performance and enhance marketing effectiveness.
Pinnacle Foods has been witnessing sluggish sales in the Specialty segment since the seven consecutive quarters. In the second quarter, net sales in the segment inched down 0.3% due to negative impacts of the AJ exit and lower volume/mix. Further, the company has been witnessing freight cost inflation for quite some time. In fact, freight costs are likely to remain high in the near future, which is likely to dent margins. Apart from Pinnacle Foods, other food companies like United Natural Foods UNFI, J. M. Smucker SJM and TreeHouse Foods THS have also been grappling with rising freight expenses.
Nevertheless, we are impressed with the company’s robust efforts to sustain its market share. We expect such strategies to continue yielding and provide cushion to the aforementioned hurdles. All said, we expect this Zacks Rank #2 (Buy) company to remain a prudent pick for investors.
Today’s Stocks from Zacks’ Hottest Strategies
It’s hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 – 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we’re willing to share their latest stocks with you without cost or obligation.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
United Natural Foods, Inc. (UNFI): Free Stock Analysis Report
Pinnacle Foods Inc. (PF): Free Stock Analysis Report
The J. M. Smucker Company (SJM): Free Stock Analysis Report
TreeHouse Foods, Inc. (THS): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research