Roth Sees Steady Recovery For Inventure Foods

• Inventure Foods Inc SNAK shares have been trending southwards in the last one year and are down 56 percent.
• Roth Capital Partners’ Anton Brenner maintained a Buy rating for the company, with a price target of $12.
• The company is poised for a recovery in 2016, with overall margins set to improve gradually, Brenner stated.

Analyst Anton Brenner expects Inventure Foods’ Frozen and Snack businesses to recover in 2016. While Snack’s margins are expected to expand quickly, Frozen’s sales and operating profits are likely to recover gradually.

“With a further significant earnings rebound projected for 2017, we would accumulate shares at the current depressed level,” Brenner stated.

The analyst noted that the company’s Fresh Frozen Foods business has reportedly lost only one account following the lack of distribution, after the listeria-related product recall and plant closure. The volumes, however, are expected to recover gradually through 2016.

Additional expenses incurred to outsource production of Boulder Canyon’s snack products in 2015 will be eliminated in 2016, as the company installs new Kettles to replace the ones destroyed in fire last year. The Roth Capital Partners report added that incremental production should boost margins.

The poor quality of Rader Farm’s own new berry crop and the resultant high costs are expected to drive a nearly 300 bps decline in the company’s frozen berry profit margins for the first nine months of 2016.

Brenner commented that Inventure Foods is likely to expand its retail penetration over time, besides using its free cash flows to reduce debt.