UPDATE: Credit Suisse Downgrades TreeHouse Foods to Underperform, Lowers PT
In a report published Wednesday, Credit Suisse downgraded its rating on TreeHouse Foods (NYSE: THS) from Neutral to Underperform, and lowered its price target from $55.00 to $50.00.
Credit Suisse noted, “We are downgrading TreeHouse Foods to Underperform (from Neutral) and lowering our target price to $50/share (from $55/share). The company reported adjusted 3Q EPS of $0.70, below consensus of $0.78 and moved to the low-end of its 2012 EPS guidance at $2.75-$2.85. Organic sales fell 2% including a 4% volume decline and operating profit fell 15%. In response to declining margins, management is taking a tougher stance with customers who aren't paying sufficient price premiums for TreeHouse's value-added services, especially in the "value" segment. While the strategy sounds familiar and theoretically margin-enhancing (they did it successfully in pickles in 2006), we feel that the stock will stagnate until management demonstrates that they have enough leverage with customers to execute it without losing too much volume. TreeHouse is now a ‘show me' story having missed or lowered guidance in five of its last seven quarters in the increasingly volatile private label food and beverage industry.”
TreeHouse Foods closed on Tuesday at $53.15.
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