Why Food & Beverage Company TreeHouse Foods' Shares Are Falling Today

Treehouse Foods Inc THS shares are trading lower by around 8% after the company reported Q3 FY23 results.

Sales from continuing operations grew 3.6% Y/Y to $863.3 million, missing the consensus of $947.3 million. 

Adjusted net sales (including the divested Snack Bars business) stood at $906.6 million, below the guidance range of $950 million to $970 million, adversely impacted by around $15 million due to a voluntary product recall and a discrete supply chain disruption late in the quarter.

Total volume/mix (excluding acquisitions) declined 3.4% Y/Y on weakness in food-away-from-home and co-manufacturing business.

Adjusted EBITDA from continuing operations increased to $89.9 million from $79.6 million a year ago, led by pricing actions to recover commodity inflation.

Adjusted EPS of $0.50 missed the consensus estimate of $0.53.

The company held $19.7 million in cash and equivalents as of September 30, 2023.

Steve Oakland, Chairman, CEO, and President said, "We're particularly pleased with the 1% unit growth in our core retail business, despite a voluntary product recall and a discrete supply chain disruption late in the quarter. These factors combined with weaker co-manufacturing and food-away from-home revenues and lower than anticipated consumption in select categories resulted in sales below expectations."

In Q3, THS bought back shares worth $50 million. At the end of Q3, the company had $216.7 million available under its share repurchase authorization.

Q4 Outlook: THS expects Adjusted revenue of $910 million-$940 million, representing approximately a 3% Y/Y decline at the midpoint, vs. consensus of $1.04 billion. 

Adjusted EBITDA is expected to be within $103 million-$113 million in the quarter.

FY23 Outlook: Adjusted net sales growth is now expected to be 4.5% year-over-year at midpoint, representing a range of $3.435 billion-$3.465 billion versus a $3.74 billion estimate (prior view: $3.71 billion-$3.78 billion).

The company reiterated its adjusted EBITDA range at $360 million-$370 million, up approximately 25% Y/Y at the midpoint.

Price Action: THS shares are down 7.38% to $39.37 on the last check Monday.