Two research firms disagreed on the outlook for TreeHouse Foods (THS) after the company reported lower than expected first quarter profit. Stephens upgraded the stock to Overweight from Equal Weight, citing the benefits of the company's acquisition of Conagra Brands' (CAG) private label business. However, Wells Fargo downgraded the shares to Market Perform from Outperform as the firm thinks that the company has a difficult operating environment and its business is becoming increasingly complex. TreeHouse sells packed food and beverages.

RESULTS: TreeHouse reported first quarter earnings per share, excluding some items, of 61c, versus the consensus outlook of 65c. The company's revenue came in at $1.54B, in-line with the consensus estimate. However, TreeHouse reiterated its fiscal 2017 EPS guidance, excluding some items, of $3.50-$3.70, versus the consensus outlook of $3.64. "The retail landscape is evolving, and consumer buying patterns are shifting...to specialized outlets and e-commerce channels. Many of our customers are responding by reinvesting in their corporate brands to offer consumers differentiated and more targeted offerings. Given the breadth and scope of our portfolio, we are uniquely positioned to serve our customers as they build their corporate brands," said Treehouse CEO Sam Reed.

UPGRADE: The fact that TreeHouse maintained its full-year EPS guidance indicates that it believes that its growth is poised to increase significantly in the second half of its fiscal year, according to Stephens analyst Farha Aslam. Given the "numerous synergy opportunities" it will have over the next 6-12 months, TreeHouse is well-positioned to attain its guidance, the analyst stated. Moreover, TreeHouse can easily benefit from "SKU rationalization, plant consolidation, sales force reorganization and IT integration," according to Aslam. In the wake of the ConAgra deal, TreeHouse is a "power house in private label" that should benefit from "consumers' increasing focus on value," the proliferation of discount supermarket chains, and the intensifying competition among Amazon (AMZN), Wal-Mart (WMT), Costco (COST) and other chains, the analyst wrote. Aslam raised her price target on the stock to $90 from $85.

DOWNGRADE: TreeHouse's Q1 results indicate that is in "an increasingly difficult operating environment" while its business is becoming "increasingly complex," according to Wells Fargo analyst Jonathan Connors. The company's cost pressures and competition are both intensifying, and it is being squeezed by retailers, the analyst stated. Additionally, TreeHouse has declined to reiterate its previous three year synergy guidance of $1.50-$1.65 per share "and it sounds as though" it will not close most of the factories it had planned to shut until 2019. Finally, the company's decision to reduce the number of products it offers by 25% could result in inventory writedowns, according to Connors, who trimmed his price target on the shares to $77-$79 from $90-$92.

PRICE ACTION: In early trading, TreeHouse Foods shares have slipped fractionally to $77.89.