THS Q1 Earnings Beat Estimates, Sales Decline on Lower Volumes

Core Insights - TreeHouse Foods, Inc. (THS) reported first-quarter 2025 results with earnings surpassing expectations despite a decline in net sales [1][2] - The company maintained its full-year guidance, indicating confidence in future performance [1] Financial Performance - Adjusted earnings were 3 cents per share, exceeding the Zacks Consensus Estimate of a loss of 21 cents, and improved from a loss of 3 cents per share in the prior year [2] - Net sales totaled $792 million, a 3.5% year-over-year decline, but above the consensus estimate of $789.6 million [2] - Adjusted net sales decreased by 3.2% year over year [2] Sales Drivers - The decline in net sales was attributed to unfavorable volume/mix due to strategic margin management, macroeconomic challenges, and service disruptions from a product recall [2][3] - The exit from the ready-to-drink business also contributed to the sales decline, although this was partially offset by the acquisition of a private tea brand and strategic price increases [2] Margin and Cost Analysis - Gross profit margin increased by 0.9 percentage points to 14.5%, driven by supply chain cost-saving initiatives and strategic pricing actions [4] - Total operating expenses rose to $120.7 million, up from $117.2 million in the previous year, primarily due to higher restructuring costs [5] EBITDA and Cash Flow - Adjusted EBITDA increased to $57.5 million from $46 million in the same quarter last year, supported by cost-saving initiatives and the Harris Tea acquisition [6] - The company ended the quarter with cash and cash equivalents of $16.4 million and long-term debt of $1,417.4 million [7] 2025 Outlook - THS expects adjusted net sales to be between $3.34 billion and $3.40 billion, reflecting a year-over-year change of a 1% decline to 1% growth [8][9] - Adjusted EBITDA from continuing operations is forecasted to be between $345 million and $375 million [9] - Capital expenditures are projected to be nearly $125 million, with free cash flow anticipated to be at least $130 million [10] Q2 Projections - For the second quarter, adjusted net sales are projected to range between $785 million and $800 million, indicating flat performance year over year at the midpoint [12] - Adjusted EBITDA for Q2 is forecasted to be between $61 million and $71 million, reflecting a timing shift of $6 million in expenses from Q1 [13]