Pinnacle Foods (PF) Notes From New CEO Meet and Greet - RBC

RBC Capital analyst, David Palmer, met with Pinnacle Foods' (NYSE: PF) management and board at a small meet-and-greet for new CEO Mark Clouse. Notes follow:

Mark inherits strong core business momentum led by Birds Eye (+9% in the 12 weeks ending 5/7/16 in measured channels), and strong earnings power/visibility fueled by synergies from Boulder Brands. Udi's is also +10% in the latest 12 weeks. There is significant upside to Boulder synergy targets with most of that upside coming in 2017.

Key variables to watch in 2016 include:

1) sustaining momentum at Birds Eye against more difficult comparisons in the fall

2) further improving Wishbone sales trends (sales flat in the latest 12 weeks vs. down 4% in 2015)

3) stabilizing high margin Dunan Hines and Smart Balance.

Pinnacle believes it can continue to acquire while the board has demonstrated a willingness in the past to sell for a compelling price (Hillshire announced acquisition of Pinnacle in May 2014, but the bid was rectracted by Hillshire one month later). The analyst does not believe that Mark Clouse's departure is a signal of issues at Mondelez, or that it has strong implications about the future acquirability of the company.

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