Will Pinnacle Earnings Live Up to the IPO Hype?

Pinnacle Foods (NYSE: PF) will release its quarterly report tomorrow, and the stock has made a nice run since coming public in late March. But now that all the IPO hype is behind it, the question is whether Pinnacle earnings will show investors the pace of growth that they want to see.

Pinnacle isn't a well-known name, but you'll find its products in millions of homes across the nation, with valuable brands including Duncan Hines baked-good mixes, Bird's Eye frozen foods, and snacks like Tim's Cascade potato chips and Snyder of Berlin pretzels. Let's take an early look at what's been happening with Pinnacle Foods over the past quarter and what we're likely to see in its quarterly report.

Stats on Pinnacle Foods

Source: Yahoo! Finance. * In one quarter since IPO.

Will shareholders feed on strong Pinnacle earnings this quarter?
In recent months, analysts have had mixed views on Pinnacle earnings, cutting their June-quarter estimates by a penny per share but boosting their full-year 2013 projections by $0.03 per share. The shares have kept up their post-IPO momentum, rising another 9% since early May.

Pinnacle's strong showing since its IPO is somewhat surprising, given the reputation that conventional grocery-foods companies have as slow-growth businesses. Industry giant Kraft Foods (KRFT.DL) broke up into two parts, with the intent of freeing its Mondelez (MDLZ 1.40%) global snack business to achieve higher growth aspirations than the namesake company's North American grocery business. Yet as it's turned out, Kraft has been the better-performing stock, as investors focus on efficiency moves to squeeze the most out of the conventional-grocery segment.

But Pinnacle came into the quarter with good results, showing net earnings that jumped more than 160% and adjusted earnings figures rising 16% from previous-year levels despite a slight drop in net sales. The company chose to get out of some of its unbranded low-margin offerings to focus on its core brands, and Pinnacle's operational results reflect a solid business that is likely to keep performing well.

One thing that's clear is that Pinnacle is not intending to stand still. Earlier this week, the company bought the Wish-Bone and Western salad-dressing business from Unilever (UL 0.98%) for $580 million, giving Pinnacle the nation's top Italian salad-dressing brand. The deal includes some tax benefits that reduce the net price to Pinnacle somewhat, but the move shows how Pinnacle is willing to pay up for what it considers to be growth-producing acquisitions.

In the Pinnacle earnings report, watch to see how the company does when you break out snacks from the rest of its products. Given the emphasis in the industry on snacks, if the company can repeat the adjusted-earnings growth of 19% for its Specialty Foods segment, then Pinnacle Foods could keep shareholders happy this quarter as well.

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