POS Data Improving for WhiteWave (WWAV) - Jefferies

Jefferies analyst, Akshay Jagdale, thinks that the recent weakness in The WhiteWave Foods Company (NYSE: WWAV) is a buying opportunity despite cutting estimates to account for increased FX headwinds. The recent POS data points to an acceleration while the stock has underperformed due to concerns over private label competition and a cannibalization in PBB. No change to Buy rating or $44 PT.

Recent POS data points to an acceleration in measured channel sales. WWAV’s measured channel sales were up 7.4% in the 4 weeks ended 1/23/16, compared to +5.4% and +4.8% in the previous 2 scanner periods. The positive momentum should continue driven by growth in the U.S. yogurt business, strong sales growth from Vega, lapping of the fresh fruits business exit, and continued solid growth in Europe.

FX a likely headwind in 2016, driven by CAD/USD. If current FX spot rates hold, the CAD should depreciate ~6% relative to USD in 2016, impacting both sales and profitability in WWAV’s Canadian business (COGS for Canadian sales are largely USD denominated). Moreover, Canada is a growing portion of the Americas business. All in, FX should be a ~1% drag on overall sales and a ~4-5c drag on EPS.

Cutting FY16 estimate to $1.38 (18% y/y growth) from $1.44 to reflect higher expected FX headwinds (we previously assumed a neutral FX impact). For perspective, consensus was at $1.37 for 2016 (16% y/y growth).

The stock underperformed on Friday (-6.7% vs. -1.9% for the S&P 500) owing to an unfavorable (brief) report that highlighted increased private label competition, cannibalization in PBB, reduced marketing spending, supply challenges in Americas Fresh Foods, rising input costs owing to the CA drought and the recent retirement of the CFO as concerns. None of these issues are new; in fact, POS data has accelerated in recent months, commodity cost outlook is more favorable (almond costs down) and private label share gains have flattened.

WWAV currently trades at 27.3x our NTM EPS estimate, compared to 28.1x for its consumer growth peers and 3-year average of ~30x. The $44 price target conservatively assumes a P/E multiple of ~26.6x FY17 EPS.

For an analyst ratings summary and ratings history on The WhiteWave Foods Company click here. For more ratings news on The WhiteWave Foods Company click here.

Shares of The WhiteWave Foods Company closed at $36.00 yesterday.

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