NEW BULLISH Plays
Pinnacle Foods Inc. - PF - close: 44.44 change: -0.25
Stop Loss: 42.45
Target(s): To Be Determined
Current Gain/Loss: Unopened
Entry on January -- at $---.--
Listed on January 12, 2016
Time Frame: Exit PRIOR to earnings in late February
Average Daily Volume = 885 thousand
New Positions: Yes, see below
2016 is off to a rough start and investors could turn more defensive as they look at an uncertain future. That could be behind the rally in shares of PF these last several days.
PF is in the consumer goods sector. According to the company,
"In more than 85% of American households, consumers reach for Pinnacle Foods brands. Pinnacle Foods is ranked on Fortune Magazine's 2015 Top 1000 companies list. We are a leading producer, marketer and distributor of high-quality branded food products, which have been trusted household names for decades. Headquartered in Parsippany, NJ, our business employs an average of 4,500 employees. We are a leader in the shelf-stable and frozen foods segments and our brands hold the #1 or #2 market position in 10 of the 14 major categories in which they compete.
Our Birds Eye Frozen segment manages brands such as Birds Eye®, gardein®, Birds Eye Steamfresh®, C&W®, McKenzie's®, and Freshlike® frozen vegetables, Birds Eye Voila! ® complete bagged frozen meals, Van de Kamp's® and Mrs. Paul's® frozen prepared seafood, Hungry-Man® frozen dinners and entrees, Aunt Jemima® frozen breakfasts, Lender's® frozen and refrigerated bagels, and Celeste® frozen pizza. Our Duncan Hines Grocery segment manages brands such as Duncan Hines® baking mixes and frostings, Vlasic® and Vlasic Farmer's Garden® shelf-stable pickles, Wish-Bone® and Western® salad dressings, Mrs. Butterworth's® and Log Cabin® table syrups, Armour® canned meats, Brooks® and Nalley® chili and chili ingredients, Duncan Hines® Comstock® and Wilderness® pie and pastry fruit fillings and Open Pit® barbecue sauces. Our Specialty Foods segment manages Tim's Cascade Snacks®, Hawaiian® kettle style potato chips, Erin's® popcorn, Snyder of Berlin® and Husman's® snacks in addition to our food service and private label businesses."
PF has been actively pursuing strategic acquisitions. Last year they bought Canadian-based Garden Protein International Inc., the maker of a plant-based protein brand Gardein. In the first quarter of 2016 PF is about to close on its acquisition of Boulder Brands Inc. (BDBD).
Here's a brief description of BDBD from the company,
"Boulder Brands, Inc. is committed to offering food solutions that give consumers opportunities to improve their lives - one product at a time. The company's health and wellness platform consists of brands that target specific health trends: the Glutino® and Udi's Gluten Free® brands for gluten-free diets; the Earth Balance® brand for plant-based diets; EVOL foods for consumers seeking simple and pure ingredients; and the Smart Balance® brand for heart healthier diets."
The BDBD acquisition is expected to add about $0.20 5o PF's earnings in 2016.
There has been some investor concern that PF may have paid too much for BDBD but the company feels the acquisition gives them a good position in the growing gluten-free market. Independent research firms forecast gluten-free sales to see a +6% compound annual growth rate (CAGR) between now and 2019. Meanwhile PF is forecasting their total sales to grow +22% CAGR from 2016-2018.
At least one Wall Street firm is bullish on PF. Yesterday BMO Capital Markets upgraded their outlook on PF to "outperform" and gave it a $50 price target. BMO feels that PF is their "top pick" for 2016.
Technically shares of PF have been consolidating sideways in a huge pennant-shaped consolidation for months (see weekly chart). At the same time shares have respected the long-term bullish trend of higher lows. The action this week has produced what looks like a bullish breakout from its major consolidation pattern. We want to see some follow through since the $45.00 region has been resistance in the past. Tonight we are listing a trigger to launch bullish positions at $45.15.
Trigger @ $45.15
- Suggested Positions -
Buy PF stock @ $45.15
- (or for more adventurous traders, try this option) -
Buy the MAR $45 CALL (PF160318C45) current ask $1.85
option price is a current quote and not a suggested entry price.
Entry disclaimer: To avoid an unfavorable entry point, we will not launch a new play if the stock gaps open more than $1.00 past our suggested entry point.
Option Format: symbol-year-month-day-call-strike