Wedbush Upgrades Inventure Foods On Margin Upside, Focus Brands Growth

In a report published Wednesday, Wedbush analyst Phil Terpolilli upgraded the rating on

from Neutral to Outperform, while raising the price target from $10 to $13. With better visibility into the future, the analyst believes that there is upside potential to the stock. "Recent positive recall-related announcements, along with continued positive growth trends in SNAK's other focus brands, make shares increasingly favorable and provide the basis for our upgrade," Terpolilli explained. The analyst expects the company to have entire moved forward from its past recall problems and to return to its pre-recall operational levels by Q4. The company is already seeing "impressive growth," ahead of the industry average, in its focus brands, such as Boulder Canyon, along with frozen fruits, vegetables and beverages. According to the Wedbush report, "Beyond favorable industry tailwinds for these natural products, we believe there is ample runway to grow distribution meaningfully in coming years. In total, we expect focus brands to grow at least double-digits on a normalized basis." In addition, despite the recent recall and absence from stores, channel checks across southeastern U.S. suggest that demand for Inventure Foods' Fresh Frozen products continues to be strong. In fact, the company has not lost shelf space to competitors for this brand. "SNAK's fastest growing brands, Boulder Canyon and Fresh Frozen, as well as an improved y/y cost outlook and efficiency improvements, should help the company gradually leverage margin in 2H15 and 2016," Terpolilli added, while expecting to higher year-on-year gross margins in 2016 and beyond.