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Will Soft Sales Hurt Kraft Heinz (KHC) This Earnings Season?
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The Kraft Heinz Company (KHC - Free Report) is slated to release second-quarter 2018 results on Aug 3, before the opening bell. This renowned food and beverages company has a mixed record of earnings surprises in the trailing four quarters. Let’s see how things are placed ahead of the upcoming quarterly results.
Sales Likely to Stay Sluggish
Kraft Heinz has been witnessing top-line weakness over the past several quarters. Soft consumer spending along with rapid changes in consumer preferences and behavior are hurting categories. As a result, consumption trends in a number of key categories like ready-to-drink beverages, frozen meals and salad dressings face persistent challenges. Due to such obstacles, net sales fell 1.1% year over year in 2017. Also, in the first quarter of 2018, the company’s net sales declined 0.3% year over year with the United States registering 3.3% fall in sales.
Well, management apprehends similar headwinds to persist in second-quarter results, with an approximate 1.5% negative impact on volumes from Ore-Ida, Planters and cold cuts as well a drag of about 1% from the combination of trade phasing and Easter shift.
Moreover, the Zacks Consensus Estimates for net sales is pegged at $6,573 million, depicting a fall of roughly 1.6% from $6,677 million in the prior-year quarter.
The Kraft Heinz Company Price, Consensus and EPS Surprise
Kraft Heinz has also been struggling with cost inflation, more specifically freight expenses, for a while. Going ahead, such trends are likely to persist and dent bottom-line performance. Apart from Kraft Heinz, other food companies like United Natural Foods (UNFI - Free Report) , McCormick & Company (MKC - Free Report) and Conagra Brands (CAG - Free Report) have also been grappling with higher freight and transportation costs.
Well, lower sales combined with such cost-related pressures are likely to drag the company’s profits in the upcoming earnings release. Notably, the consensus mark for earnings is currently pegged at 91 cents for the second quarter, portraying a fall of 7.1% from 98 cents recorded in the year-ago quarter. The figure has declined by a penny over the past thirty days.
Will Strategic Efforts Aid Revival?
Kraft Heinz successfully generated cumulative savings of $1.7 billion from the Integration Program in 2017. The program mainly focuses on work-force reductions along with factory closures and consolidations. A major part of these savings is being invested in the business for innovation, brand building and marketing to stimulate top-line growth. Other productivity improvement initiatives include zero-based budgeting, modernization and capability building within the manufacturing footprint as well as building a performance driven culture in the company.
Although we are optimistic regarding these initiatives and expect them to yield in the long run, an immediate turn around is unlikely. In fact, management anticipates majority of these efforts to add to the company’s gains from the second half of 2018. Till then, the aforementioned headwinds are likely to continue plaguing the company’s performance.
Let’s now take a look at the Zacks Model for the upcoming quarterly release.
What the Zacks Model Unveils
Our proven model doesn’t show that Kraft Heinz is likely to beat bottom-line estimates in the upcoming quarterly release. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Kraft Heinz has an Earnings ESP of +0.23%, its Zacks Rank #4 (Sell) makes us less confident regarding an earnings beat.
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Will Soft Sales Hurt Kraft Heinz (KHC) This Earnings Season?
The Kraft Heinz Company (KHC - Free Report) is slated to release second-quarter 2018 results on Aug 3, before the opening bell. This renowned food and beverages company has a mixed record of earnings surprises in the trailing four quarters. Let’s see how things are placed ahead of the upcoming quarterly results.
Sales Likely to Stay Sluggish
Kraft Heinz has been witnessing top-line weakness over the past several quarters. Soft consumer spending along with rapid changes in consumer preferences and behavior are hurting categories. As a result, consumption trends in a number of key categories like ready-to-drink beverages, frozen meals and salad dressings face persistent challenges. Due to such obstacles, net sales fell 1.1% year over year in 2017. Also, in the first quarter of 2018, the company’s net sales declined 0.3% year over year with the United States registering 3.3% fall in sales.
Well, management apprehends similar headwinds to persist in second-quarter results, with an approximate 1.5% negative impact on volumes from Ore-Ida, Planters and cold cuts as well a drag of about 1% from the combination of trade phasing and Easter shift.
Moreover, the Zacks Consensus Estimates for net sales is pegged at $6,573 million, depicting a fall of roughly 1.6% from $6,677 million in the prior-year quarter.
The Kraft Heinz Company Price, Consensus and EPS Surprise
The Kraft Heinz Company Price, Consensus and EPS Surprise | The Kraft Heinz Company Quote
Higher Costs Also a Worry
Kraft Heinz has also been struggling with cost inflation, more specifically freight expenses, for a while. Going ahead, such trends are likely to persist and dent bottom-line performance. Apart from Kraft Heinz, other food companies like United Natural Foods (UNFI - Free Report) , McCormick & Company (MKC - Free Report) and Conagra Brands (CAG - Free Report) have also been grappling with higher freight and transportation costs.
Well, lower sales combined with such cost-related pressures are likely to drag the company’s profits in the upcoming earnings release. Notably, the consensus mark for earnings is currently pegged at 91 cents for the second quarter, portraying a fall of 7.1% from 98 cents recorded in the year-ago quarter. The figure has declined by a penny over the past thirty days.
Will Strategic Efforts Aid Revival?
Kraft Heinz successfully generated cumulative savings of $1.7 billion from the Integration Program in 2017. The program mainly focuses on work-force reductions along with factory closures and consolidations. A major part of these savings is being invested in the business for innovation, brand building and marketing to stimulate top-line growth. Other productivity improvement initiatives include zero-based budgeting, modernization and capability building within the manufacturing footprint as well as building a performance driven culture in the company.
Although we are optimistic regarding these initiatives and expect them to yield in the long run, an immediate turn around is unlikely. In fact, management anticipates majority of these efforts to add to the company’s gains from the second half of 2018. Till then, the aforementioned headwinds are likely to continue plaguing the company’s performance.
Let’s now take a look at the Zacks Model for the upcoming quarterly release.
What the Zacks Model Unveils
Our proven model doesn’t show that Kraft Heinz is likely to beat bottom-line estimates in the upcoming quarterly release. For this to happen, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Although Kraft Heinz has an Earnings ESP of +0.23%, its Zacks Rank #4 (Sell) makes us less confident regarding an earnings beat.
You can see the complete list of today’s Zacks #1 Rank stocks here.
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