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  • BMO Capital Markets analysts led by Kenneth B. Zaslow upgraded shares of Pinnacle Foods Inc (NYSE: PF) to Outperform on Monday, boosting their price target to $50.00 and designating it as their "top pick" for 2016. The experts based their bullishness on the fact that focus will shift toward:
  • 1) Earnings power, especially for 2017.
  • 2) "The potential acceleration of its long-term growth relative to its initial growth  algorithm in 2018 and beyond."
  • 3) The defensive nature of this domestic company, which also offers "superior execution of a sound strategy."

According to the report, the mixture of internal growth opportunities, recent acquisitions (like the Boulder Brands purchase) and "the likely need for defensive investment posturing in uncertain global markets" has created an attractive investment opportunity at Pinnacle Foods.

For 2016, the analysts expect the company to exceed its long-term growth algorithm for the third year in a row. This is proof of its "stellar execution of product innovation, pricing architecture, margin management, and cash deployment."

Zaslow and his team expected the acquisition of Boulder to transform Pinnacle's earnings power. In fact, the synergy targets will probably prove conservative.

The company is likely to benefit from more normalized egg white costs in fiscal 2017.

Similar to the past several years, the firm expects Pinnacle's growth rate to accelerate from its long-term growth targets starting in 2018, reflecting:

  • 1) "The evolution of its portfolio to higher-growth categories than its legacy portfolio at the time of the IPO."
  • 2) Continued cost reduction opportunities from the Boulder acquisition.
  • 3) Revenue opportunities.
  • 4) A decrease in interest expense as the company aggressively deleverages its balance sheet to below 4x.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.

Latest Ratings for PF

May 2017BerenbergInitiates Coverage OnBuy
Apr 2017JefferiesInitiates Coverage OnBuy
Apr 2017Morgan StanleyUpgradesEqual-WeightOverweight

View More Analyst Ratings for PF
View the Latest Analyst Ratings

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