Investors took a hard hit as TreeHouse Foods, Inc. share prices nosedived following the release of a mixed bag of fourth-quarter results and a bleak FY24 outlook.
Fall in Quarterly Performance
In the fourth quarter, the company reported adjusted earnings per share (EPS) of 77 cents, trumping the analyst consensus of 73 cents. However, the quarterly net sales of $910.8 million missed market expectations by falling short at $925.44 million.
Suppressed Sales and Earnings
A 4.8% decrease in net sales stemmed mainly from volume/mix issues in the retail business. Compounded by supply chain disruptions previously disclosed by the company at one of its broth facilities as well as in the pretzels and cookies categories, the dive in sales presented a significant setback.
Impact on Margins and Profits
The company also reported a decline in adjusted EBITDA from continuing operations, down from $118.5 million in the year-ago period to $108.4 million in the fourth quarter of 2023. The gross profit margin as a percentage of net sales also witnessed a fall, decreasing to 16.7% from 18.3% in the previous year. The falter was attributed to supply chain disruption, elevated fixed cost absorption, increased labor and manufacturing plant maintenance costs, and an adverse category mix.
Dim Outlook
TreeHouse Foods forecasted FY24 revenues in the range of $3.43 billion to $3.50 billion, notably below the $3.56 billion estimate. The company also projected first-quarter net sales of $780 million to $810 million compared to the market expectation of $887.38 million. Additionally, the company foresees an estimated decline of $60 million in net sales and $20 million in adjusted EBITDA for FY24 due to ongoing efforts to restart one of the broth facilities.
Market Reaction
Following these disheartening revelations, THS shares plunged by 9.9%, dropping to $38.50 premarket on Friday.
