TreeHouse Foods ((THS – Free Report) ) is a leading producer of private-label packaged foods and beverages in North America, serving major retail grocery chains, foodservice distributors, and other branded food manufacturers. The company specializes in providing a wide array of private-label offerings, allowing retailers to offer cost-effective, high-quality alternatives to national brands.
TreeHouse Foods has been a very poor performing stock over the last decade, more than halving investors’ money in that time. This severe underperformance has been driven by several factors, but most notably, annual sales have fallen from a high of $6 billion in 2016 to just $3.3 billion today.
Further muddying TreeHouse Foods’ near-term future is its low Zacks Rank, which indicates that analysts have been cutting earnings estimates. Based on this setup, I think investors should avoid TreeHouse stock until there is a material turnaround in its business fundamentals or earnings revision trend.
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TreeHouse Foods Earnings Estimates Collapse
TreeHouse Foods is expected to see a further decline in sales this year, with analysts forecasting a 4.3% drop. Earnings too have been revised significantly lower, giving it a Zacks Rank #5 (Strong Sell) rating, which does not bode well for the near-term expectations of the stock.
Current quarter earnings estimates have been lowered by 27.6%, while FY24 projections have fallen by 12.2% and FY25 by 18.2%.
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TreeHouse Foods Stock Valuation
TreeHouse is trading at a one year forward earnings multiple of 16.7x, which is below the market average and just below its five-year median of 17.8x. While this is below its historical average and is not quite a premium valuation, it still seems high for a business that has such poor growth prospects.
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Should Investors Avoid THS Shares?
TreeHouse Foods has faced significant headwinds over the last year, and it does not seem they will subside any time soon. The food business is especially difficult as there is tremendous competition, and the industry lives on razor thin margins.
Until THS can show a marked improvement in growth or other business fundamentals, I would advise investors to avoid the stock and seek opportunities elsewhere.
