Why Did Stifel Decrease Estimates At 3 Food Companies? (Hint: A Lot Has To Do With FX)

In a report published Friday, Stifel analyst Christopher Growe lowered his price target on TreeHouse Foods Inc. (NYSE: THS) while also lowering his earnings per share estimate on Kraft Foods Group Inc (NASDAQ: KRFT) and WhiteWave Foods Co.(NYSE: WWAV)

TreeHouse Foods: ‘Surprised' By FX Hit To Earnings

TreeHouse's fourth quarter earnings per share of $0.99 was $0.18 below Growe's estimate and was attributed to a significant inventory reduction from a large customer, slow consumption at Flagstone, and most troubling – currency headwinds.

Growe explained that the company suffered from its sourcing of inputs in the U.S. for its Canadian operations and its inability to raise prices to offset its higher costs.

According to Growe "there are no doubt investors (and this analyst)" are still surprised by the "magnitude" of the foreign exchange hit to earnings. The analyst wrote that that investors were wrong to think that the company was relatively immune to foreign exchange volatility, and the earnings report "no doubt surprised" the market.

Nevertheless, shares remain Buy rated as the company's foreign exchange woes "masks a solid underlying growth story" of three percent revenue growth and eight percent earnings per share growth for its ongoing business and recent acquisitions will also provide "significant contributions."

Kraft Foods Group: Heavier Restructuring Costs Likely

Growe wrote that Kraft's fourth quarter print marked a "strong sales and earnings conclusion" to the year, however the analyst was forced to lower his 2015 estimates.

Growe adjusted his 2015 earnings per share estimate to $3.39 from a previous $3.44 due to the inclusion of a one-time restructuring cost $150 million which will weight on earnings as cost savings initiatives will continue to be an emphasis by the company. The analyst also lowered his 2016 earnings per share estimates to $3.67 from a previous $3.68.

The analyst acknowledged several possibilities at Kraft which includes an outright sale of the business, selling specific assets, acquiring to build a business capable of faster growth, an acceleration in underlying growth, and the potential for an earnings rebase to set the organization on a path to faster growth. The analyst added that these scenarios holds the potential for "some variability" in the stock price in the short run.

Shares remain Buy rated with an unchanged $70 price target.

WhiteWave Foods Company: FX Headwind ‘Heavier-Than-Expected'

WhiteWave reported an in-line fourth quarter result and offered initial 2015 guidance including an earnings per share estimate of $1.08 to $1.12, including a $0.05 headwind from foreign exchange.

Growe estimated that in 2015, nearly 10 percent of reported sales growth will be supported by 7.5 percent organic revenue growth, a four percent contribution from the So Delicious acquisition, and a -1.7 percent foreign exchange headwind.

With that said, Growe lowered his 2015 earnings per share estimate to $1.12 from a previous $1.13. The analyst also lowered his 2016 earnings per share estimates to $1.31 from a previous $1.30.

Shares remain Buy rated with an unchanged $41 price target as the company will introduce new products in 2015 backed by marketing initiatives while its plant-based beverage segment growth will remain "robust" in 2015.