Kraft Heinz (KHC) Benefits From Pricing Actions Amid Costs
The Kraft Heinz Company KHC is focused on transforming its business to unleash its full potential. The iconic consumer packaged food and beverage company benefits from strategic pricing efforts amid an inflationary cost landscape.
These upsides drove KHC’s second-quarter 2023 results, with net sales and earnings increasing year over year. The company remains well-placed for 2023. Management expects 2023 organic net sales growth of 4-6% while adjusted earnings per share (EPS) is envisioned in the $2.83-$2.91 band, reflecting growth from $2.78 per share reported in the year-ago period.
Let’s delve deeper.
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Pricing Actions Drive Growth
In second-quarter 2023, Kraft Heinz’s pricing rose 11 percentage points year over year, reflecting higher list prices. In the North America and International segment, pricing increased 9.4 and 16.5 percentage points, respectively. Management expects an adjusted gross margin expansion, driven by pricing and gross efficiencies, in 2023.
Robust pricing efforts boosted the company’s quarterly net sales, which increased 2.6%. Sales grew in North America and International regions. Results continued to gain from strength in the foodservice, emerging markets and U.S. Retail Grow platforms. In the quarter, Foodservice, Emerging Markets and GROW platforms in U.S. Retail grew nearly 15%, 11% and 1%, respectively. Taste Elevation organic net sales increased 6%, with 8% consumption growth. Easy Meals Organic net sales grew 1%, with solid consumption.
Transformation on Track
The Zacks Rank #3 (Hold) company is committed to accelerating its profit and enhancing the long-term shareholders’ value. As part of its next transformation phase, management unveiled AGILE@SCALE in February 2022. The strategy has been helping Kraft Heinz to enhance its agile expertise and capabilities via partnerships with technology giants and cutting-edge innovators. The company has been focused on Revenue Management initiatives via proprietary digital solutions. The company is on track to deliver solutions in its value chain to accelerate growth and drive efficiencies.
Hurdles on the Way
Kraft Heinz has been grappling with the inflationary environment, although the inflation continues to moderate. Management expects mid to high-single-digit inflation in 2023, including low to mid-single-digit inflation in the second half of the year.
The company has witnessed soft volumes for the past few quarters. In the second quarter, KHC’s volume/mix fell 7 percentage points due to the elasticity effect of pricing actions. The company expects volume declines to moderate for the back half of the year.
Focusing on growth endeavors will likely help Kraft Heinz stay afloat amid such hurdles. KHC’s shares have decreased 9.6% in the past three months compared with the industry’s 7.9% decline.
Appetizing Food Picks
MGP Ingredients MGPI, which produces and markets ingredients and distillery products, currently sports a Zacks Rank #1 (Strong Buy). MGPI has a trailing four-quarter earnings surprise of 18% on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial-year sales and earnings per share suggests growth of 5.8% and 10.4%, respectively, from the corresponding year-ago reported figures.
Flowers Foods FLO emphasizes providing high-quality baked items. The company currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Flowers Foods’ current financial-year sales suggests growth of 6.7% from the year-ago period’s actuals. FLO has a trailing four-quarter earnings surprise of 7.6% on average.
Celsius Holdings CELH, which offers functional drinks and liquid supplements, currently carries a Zacks Rank #2. CELH delivered an earnings surprise of 100% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current financial-year sales and earnings suggests growth of 88.9% and 170.3%, respectively, from the year-ago reported numbers.
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Flowers Foods, Inc. (FLO) : Free Stock Analysis Report
Kraft Heinz Company (KHC) : Free Stock Analysis Report
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