Pinnacle Foods Earnings Review Served Up By UBS

UBS reviewed

Pinnacle Foods IncPF

's Q2 earnings in its note published Friday. The company reported second-quarter earnings of $0.42 per share, beating the consensus estimate of $0.39, led by stronger Birdseye sales (+6.1 percent year-over-year) and outsized gross margin expansion (+260bp year-over-year vs Street +110bp year-over-year).

Following these results, the analysts raised their FY16 EPS estimate to $2.15 from $2.11 and FY17 EPS estimate to $2.37 from $2.33.

The updated $2.15 EPS estimate is based on the following:

PF organic sales (Birdseye +4.3 percent, DH -1.9 percent)
Boulder sales of $480 million
Gross margin 29.7 percent (+145bp year-over-year)
Operating margin 17.1 percent (+45bp year-over-year)
Tax rate 36.8 percent

The analysts believe 2017 brings greater earnings levers as key capacity additions (Vancouver + Maryland) can accelerate Gardein/Birdseye distribution and Boulder supply chain synergies boost gross margin.

UBS maintains its Neutral rating on Pinnacle Foods, raising price target to $50 from $48.

At time of writing, Pinnacle Foods was up 2.91 percent on the day, seen trading at $50.24.

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