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Should Heineken Holding N.V.'s (AMS:HEIO) Recent Earnings Decline Worry You?

Simply Wall St

Today I will take a look at Heineken Holding N.V.'s (ENXTAM:HEIO) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the beverage industry performed. As an investor, I find it beneficial to assess HEIO’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

See our latest analysis for Heineken Holding

Despite a decline, did HEIO underperform the long-term trend and the industry?

HEIO's trailing twelve-month earnings (from 30 June 2019) of €953m has declined by -6.2% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 4.9%, indicating the rate at which HEIO is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the entire industry is experiencing the hit as well.

ENXTAM:HEIO Income Statement, October 9th 2019

In terms of returns from investment, Heineken Holding has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 3.0% is below the NL Beverage industry of 5.2%, indicating Heineken Holding's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Heineken Holding’s debt level, has declined over the past 3 years from 10% to 10%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 94% to 102% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research Heineken Holding to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for HEIO’s future growth? Take a look at our free research report of analyst consensus for HEIO’s outlook.
  2. Financial Health: Are HEIO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.