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Why TreeHouse Foods Inc. Stock Is Falling Today

By Bradley Seth McNew – May 4, 2017 at 2:41PM

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This processed and packaged foods maker didn't quite cut it in Q1, regardless of an impressive jump in earnings.

What happened

Shares of TreeHouse Foods (THS 2.84%) are sinking today, down 11.6% as of 1:46 p.m. EDT, after the company reported Q1 earnings that showed an impressive rise in sales and income, but not enough to live up to expectations.  

So what

For the first quarter, sales were up 21% year over year. TreeHouse Foods was able to swing from a net loss in Q1 2016 to earnings per share of $0.49 this quarter. While the company's sales were about in line with expectations, the jump in earnings wasn't enough to live up to average analyst estimates of $0.65 per share for the quarter.  

A plate of pumpkin cookies next to a can of processed pumpkin filling.

Image source: E.D. Smith, a sub-brand of TreeHouse Foods.

Now what

CEO Sam Reed said in the earnings release that the company is evolving to meet the needs of its customers through better distribution, including a better e-commerce strategy. He further stated: "Our new organizational structure is showing great promise -- our sales teams delivered volume/mix growth in the first quarter despite the anemic and uneven sentiment across the entire food space, which posted a volume decline of 270 basis points."

Additionally, the company has been investing and divesting to assure it has the right structure of brands to meet its goals, including the February 2016 purchase of the private brands business from ConAgra Brands, now called TreeHouse Private Brands, and the recent announcement in April that TreeHouse will sell its soup and infant feeding business. Reed said that the company is "intensely focused" on continuing to grow its top line while avoiding margin compression amid an "inflationary commodity environment."

Seth McNew has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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