The New Jersey-based branded food product company is "not yet at its pinnacle," analysts said.
"With Pinnacle shaking off any distractions from the failed Hillshire Brands Co. (HSH) bid, gaining share and exceeding productivity savings, we see the stock as attractive. A strong management team, solid execution vs. reasonable goals in a tough industry environment, potential for accretive M&A and reasonable free cash flow valuation (9% yield) lead us to our 'buy' opinion," analysts said.
"Pinnacle's shares have done better than we expected in the last quarter. While competition is starting to get more aggressive as Pinnacle gains share, we recognize that momentum is a precious thing in the food industry," analysts added.
Shares of Pinnacle Foods closed up 0.06% at $33.65 on Friday.
Separately, TheStreet Ratings team rates PINNACLE FOODS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate PINNACLE FOODS INC (PF) a HOLD. The primary factors that have impacted our rating are mixed--some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 9.4%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, our view is that this company's fundamentals will not have much impact in either direction, allowing the stock to generally move up or down based on the push and pull of the broad market.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market on the basis of return on equity, PINNACLE FOODS INC has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.
- The gross profit margin for PINNACLE FOODS INC is currently lower than what is desirable, coming in at 29.40%. It has decreased from the same quarter the previous year. Despite the weak results of the gross profit margin, the net profit margin of 21.78% has significantly outperformed against the industry average.
- The debt-to-equity ratio of 1.33 is relatively high when compared with the industry average, suggesting a need for better debt level management. Along with the unfavorable debt-to-equity ratio, PF maintains a poor quick ratio of 0.88, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: PF Ratings Report