TreeHouse Foods second-quarter net income beats Street, but shares fall on volume concerns

TreeHouse’s 2Q net income beats, but shares fall

WESTCHESTER, Ill. — Food maker TreeHouse Foods Inc. said Thursday that its second-quarter net income rose 17.5 percent, but its revenue came in below estimates and shares fell some 10 percent.

The company, which makes store-brand food including pickles, nondairy creamer and soup, raised its guidance for the year even though it said industry volumes “have been challenged of late.”

Shoppers have been cutting their spending as they deal with the weak economy and trading down to store brands, but major brands have responded by reducing prices and making other changes.

The company earned $21.7 million, or 60 cents per share. That compares to with net income of $18.4 million, or 58 cents per share, in the same quarter last year.

Without one-time items, the company earned 70 cents per share.

Analysts, who typically exclude one-time items, expected earnings per share of 63 cents, according to Thomson Reuters.

Net revenue climbed nearly 20 percent to $446.2 million, but it missed estimates of $473.6 million. Volume fell in categories such as baby food.

The company said sales in its grocery division in North America rose 30 percent to $307.5 million on the acquisition of Sturm Foods. When that’s excluded, net sales dropped 1.1 percent.

Food away from home sales fell 1.3 percent when excluding Sturm’s acquisition. But including the acquisition, the segment’s revenue rose 7 percent to $80.3 million.

Industrial and export net sales fell 5.4 percent on a drop in volume of 2.4 percent and lower pricing.

Shares fell $4.65, or 9.8 percent, to $42.92 on heavy volume Thursday.

Standard & Poor’s analyst Tom Graves raised his opinion on the stock to “Hold” from “Sell” on the company’s buyout of store-brand maker Sturm and the earnings beat. But he lowered his 12-month target share price to $46 from $48 because of concerns about weak demand and pricing.

The company now expects to earn between $2.70 to $2.75 per share in 2010, up from previous guidance of $2.65 to $2.70.

Graves boosted his estimate from $2.70 to $2.75. Analysts, on average, expect the company to earn $2.72 per share, according to Thomson.