News

Shares of TreeHouse Foods (NYSE: THS) were falling today after the food wholesaler missed estimates on the top line in its fourth-quarter earnings report and offered weak guidance for the first quarter.

As of 2:02 p.m. ET, the stock was down 14.8%.

Why TreeHouse Foods missed the mark

The company, which specializes in private-label foods, said revenue in the quarter fell 4.8% to $910.8 million, which missed estimates of $925.4 million.

Part of the decline in sales was due to a supply chain disruption at one of its broth facilities, as well as lower volume and a change in sales mix. The company raised prices aggressively earlier in the year, but prices were essentially flat in the fourth quarter.

Gross margin also fell 160 basis points to 16.7% as the supply chain issue impacted profitability, and TreeHouse reported adjusted earnings per share (EPS) of $0.77 on the bottom line, which was down from $0.97 in the quarter a year ago, but better than the consensus at $0.73.

CEO Steve Oakland said, "TreeHouse Foods made important progress in 2023 to advance our portfolio strategy focused on higher-growth, higher-margin categories, enhance our supply chain capabilities, and improve our service levels."

What 2024 looks like for TreeHouse

TreeHouse's guidance also failed to give investors confidence. The company expects revenue of $3.43 billion to $3.5 billion, or growth of 0% to 2% as it plans for "modest, targeted, deflationary pricing." That was below the analyst consensus for $3.56 billion.

It also projected adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $360 million to $390 million, which compares to $365.9 million.

TreeHouse touted gains in market share, but the forecast for 2024 shows that growth in the business isn't automatic. While the stock trades at a reasonable valuation, investors should expect more modest growth at this point, barring the possibility of an acquisition.

Should you invest $1,000 in TreeHouse Foods right now?

Before you buy stock in TreeHouse Foods, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and TreeHouse Foods wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

*Stock Advisor returns as of February 12, 2024

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.