Kraft Heinz (KHC) Tops Q3 Earnings, Weak Sales Hit Stock
The Kraft Heinz Company KHC posted mixed third-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same.
Notably, the company’s shares were down 1.16% in afterhours trading on Nov 3, in response to the mixed performance.
Earnings
Adjusted earnings per share of 83 cents surpassed the Zacks Consensus Estimate of 76 cents by 9.2%. Moreover, earnings surged 88.6% year over year on improved sales trends and growth in adjusted EBITDA.
Sales
Reported sales of $6.27 billion missed the Zacks Consensus Estimate of $6.31 billion by 0.7% but improved 2.4% year over year. However, pro-forma (adjusted) sales were down 1.5% owing to the negative impact of currency headwinds of 0.5% as a stronger dollar hurt the value of international sales.
Organically (excluding currency), sales dipped 1% because of lower volume/mix and pricing.
Volume/mix declined 0.3% in the quarter in comparison to a 2.1% rise in the previous quarter. The decline can be attributed to lower shipments across several categories, particularly cold cuts, foodservice and nuts in the U.S.
Pricing was also down 0.7% owing to deflation in meat and coffee in the U.S. and coffee in Canada; higher promotion mainly driven by timing of expenses in Europe, as well as stepping up of support for product launches across the globe.
Adjusted EBITDA rose 21.7% to $1.8 billion backed by cost savings from restructuring activities and pricing gains.
Segment Discussion
U.S.: Adjusted net sales of $4.39 billion declined 1.2% (reported and organic) year over year on lower volumes. Volume/mix decreased 0.7% in the quarter in comparison to a 3.1% decline in the last quarter.
Gains from innovation in Lunchables and coffee as well as macaroni & cheese were more than offset by declines in cold cuts, foodservice and nuts.
Pricing decreased 0.7% despite deflation in key commodities like meat and coffee.
Canada: Adjusted net sales of $550 million improved 2% year over year (reported and organic) on higher volume. Volume/mix grew 3.4% on the back of gains in foodservice as well as shipment timing in macaroni & cheese and coffee.
Pricing decreased 1.4% due to commodity-driven pricing actions in coffee.
Europe: Adjusted net sales of $513 million declined 14.5% year over year due to currency headwinds. Organically, sales fell 7.8% amid a challenging consumer and retail environment.
Volume/mix was down 4.9% owing to consumption weakness across several categories, primarily in the U.K. and the Netherlands. Also, the volume/mix compared unfavorably with the 0.1% increase in the previous quarter.
Pricing declined 2.9% due to increased promotional initiatives.
Rest of World: Adjusted net sales of $809 million improved 4.4% year over year. Organically, sales grew 3.6% on higher volume/mix and pricing. While pricing increased 1.9%, volume/mix rose 1.7%.
Kraft Heinz currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Peer Releases
Kellogg Company K posted an earnings beat in the third quarter of 2016 on robust cost savings. Third-quarter adjusted earnings of 96 cents per share beat the Zacks Consensus Estimate of 87 cents by 10.3%.
Mondelez International, Inc. MDLZ reported third-quarter 2016 results wherein earnings beat the Zacks Consensus Estimate while revenues missed the same. Third-quarter adjusted earnings of 52 cents per share beat the Zacks Consensus Estimate of 43 cents by 20.9%.
Upcoming Peer Release
Sysco Corporation SYY is set to report first-quarter fiscal 2017 results before the opening bell on Nov 7. Last quarter, this global food products maker and distributor posted a positive earnings surprise of 6.67%.
KRAFT HEINZ CO Price, Consensus and EPS Surprise
KRAFT HEINZ CO Price, Consensus and EPS Surprise | KRAFT HEINZ CO Quote
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