Heinz Shares Decline After TreeHouse Results: New York Mover

H.J. Heinz (HNZ) Co. fell the most in more than four months after TreeHouse Foods Inc. (THS)’s preliminary earnings signaled consumers may be shifting away from name-brand food products.

Heinz dropped 2.9 percent to $51.91 at 3:51 p.m. in New York after earlier sliding as much as 3.8 percent, the biggest intraday decline since Aug. 23. Pittsburgh-based Heinz rose 9.3 percent in 2011.

TreeHouse, based in Oak Brook, Illinois, said fourth- quarter adjusted profit per share may have been as much as 87 cents, trailing analysts’ average estimate of $1.07. The weaker- than-expected results were caused in part by consumers buying more groceries from dollar stores and shifting to cheaper brands and smaller-sized selections, TreeHouse said.

Heinz, the maker of the namesake condiments and Ore-Ida potato snacks, has taken a similar strategy, which may lead some investors to believe it too will have weaker earnings, said Thilo Wrede, an analyst with Jefferies & Co. in New York. Heinz also has traded at higher price multiples than other food stocks and was exposed to a bigger drop, he said.

“TreeHouse called out smaller package sizes as a reason for earnings being down,” Wrede said in a telephone interview. “Heinz’s drop is partially due to TreeHouse’s announcement and the fact that it trades at higher multiples.”

While Heinz stock fell after TreeHouse’s report, Wrede said the two companies are very different. Heinz has a strong presence in emerging markets, making it more similar to Northfield, Illinois-based Kraft Foods Inc. (KFT)

TreeHouse fell 10 percent to $56.37 after earlier dropping as much as 16 percent. Kraft slid 0.2 percent to $38.64.

To contact the reporter on this story: David Welch in Detroit at dwelch12@bloomberg.net

To contact the editor responsible for this story: Kevin Orland at korland@bloomberg.net

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