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The Kraft Heinz (KHC) Poised on Solid Demand & Operating Model
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Companies in the food industry are seeing improvement in their retail businesses, thanks to burgeoning demand from elevated at-home consumption amid the pandemic. One such company to benefit from this trend is The Kraft Heinz Company (KHC - Free Report) . Apart from this, the company’s operating model is driving growth. Also, it is on track with efficiency building plans. Let’s discuss further.
Pandemic-led Demand Aids Growth
The Kraft Heinz is witnessing rising demand for its products thanks to the coronavirus-led higher at-home consumption. In fact, burgeoning demand amid the pandemic bolstered the company’s fourth-quarter 2020 results. The top and the bottom line surpassed the Zacks Consensus Estimate and increased year over year. Organic net sales rose 6% on the back of sustained growth momentum in retail business and favorable pricing, which were somewhat offset by softness in foodservice. Further, volume/mix increased 1.2 percentage points thanks to continued at-home consumption growth partly stemming from the pandemic.
On its fourth-quarter earnings call, management stated that based on the company’s performance to date, The Kraft Heinz expects organic net sales growth of flat-to-positive during first-quarter 2021. Moreover, the company continues to anticipate 2021 financial performance to be ahead of its strategic plan.
What Else is Working in The Kraft Heinz’s Favor?
The Kraft Heinz is committed to its operating model, which was laid out last year. The model incorporates five key elements which includes — People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. In its last earnings call, management highlighted that within consumer platform, the company’s top priority Grow portfolio increased 15% in retail channels along with acceleration of growth in emerging markets. Ops Center element will enable The Kraft Heinz to establish an efficient, fast and integrated supply chain network. Notably, it achieved nearly $400 million of gross productivity efficiencies during 2020. Moreover, Partner Program element is designed to create solid customer partnerships and develop new strategic partnerships.
Lastly, the Fuel Our Growth strategy will enable the company to invest in growth opportunities, solidify its long-term market position as well as boost shareholders’ returns. Also, this strategy will help the company manage its portfolio and accelerate its strategic plan, augment geographic presence, increase focus on growth areas as well as undertake sustainable pricing actions.
In terms of cost savings, The Kraft Heinz is increasing visibility and control of its cost components. It has also been keeping a close watch on investments made for enhancing sales and customer services. Further, the company is on track with examining its SKUs to remove complexities and boost mix. In this regard, the company’s Ops Center platform drove efficiency gains via simplification and waste reduction. Notably, The Kraft Heinz benefited from simplifying its assortment and improving capacity through a 16% reduction in SKUs during 2020. In fact, management is on track to reduce SKU further in 2021.
Hurdles on Way
The Kraft Heinz is seeing a rise in selling, general and administrative expenses, excluding impairment losses for a while. Notably, the metric increased from $973 million reported in the year-ago quarter to $837 million during the fourth quarter of 2020. Apart from this, the company is incurring increased supply chain costs, including pandemic-induced expenses, higher incentive compensation as well as significant investments in marketing and sales. Apart from this, sales in The Kraft Heinz’s Canada segment is declining year over year since the past few quarters. During the fourth quarter, net sales of $447 million declined 2% in the segment, while volume/mix fell 11 percentage points.
Nevertheless, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company to stay firm. Notably, shares of The Kraft Heinz have increased 13.4% in the past three months compared with the industry’s 3.4% growth.
Medifast, Inc. (MED - Free Report) , currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 17.4%, on average.
The J. M. Smucker Company (SJM - Free Report) , currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
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The Kraft Heinz (KHC) Poised on Solid Demand & Operating Model
Companies in the food industry are seeing improvement in their retail businesses, thanks to burgeoning demand from elevated at-home consumption amid the pandemic. One such company to benefit from this trend is The Kraft Heinz Company (KHC - Free Report) . Apart from this, the company’s operating model is driving growth. Also, it is on track with efficiency building plans. Let’s discuss further.
Pandemic-led Demand Aids Growth
The Kraft Heinz is witnessing rising demand for its products thanks to the coronavirus-led higher at-home consumption. In fact, burgeoning demand amid the pandemic bolstered the company’s fourth-quarter 2020 results. The top and the bottom line surpassed the Zacks Consensus Estimate and increased year over year. Organic net sales rose 6% on the back of sustained growth momentum in retail business and favorable pricing, which were somewhat offset by softness in foodservice. Further, volume/mix increased 1.2 percentage points thanks to continued at-home consumption growth partly stemming from the pandemic.
On its fourth-quarter earnings call, management stated that based on the company’s performance to date, The Kraft Heinz expects organic net sales growth of flat-to-positive during first-quarter 2021. Moreover, the company continues to anticipate 2021 financial performance to be ahead of its strategic plan.
What Else is Working in The Kraft Heinz’s Favor?
The Kraft Heinz is committed to its operating model, which was laid out last year. The model incorporates five key elements which includes — People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. In its last earnings call, management highlighted that within consumer platform, the company’s top priority Grow portfolio increased 15% in retail channels along with acceleration of growth in emerging markets. Ops Center element will enable The Kraft Heinz to establish an efficient, fast and integrated supply chain network. Notably, it achieved nearly $400 million of gross productivity efficiencies during 2020. Moreover, Partner Program element is designed to create solid customer partnerships and develop new strategic partnerships.
Lastly, the Fuel Our Growth strategy will enable the company to invest in growth opportunities, solidify its long-term market position as well as boost shareholders’ returns. Also, this strategy will help the company manage its portfolio and accelerate its strategic plan, augment geographic presence, increase focus on growth areas as well as undertake sustainable pricing actions.
In terms of cost savings, The Kraft Heinz is increasing visibility and control of its cost components. It has also been keeping a close watch on investments made for enhancing sales and customer services. Further, the company is on track with examining its SKUs to remove complexities and boost mix. In this regard, the company’s Ops Center platform drove efficiency gains via simplification and waste reduction. Notably, The Kraft Heinz benefited from simplifying its assortment and improving capacity through a 16% reduction in SKUs during 2020. In fact, management is on track to reduce SKU further in 2021.
Hurdles on Way
The Kraft Heinz is seeing a rise in selling, general and administrative expenses, excluding impairment losses for a while. Notably, the metric increased from $973 million reported in the year-ago quarter to $837 million during the fourth quarter of 2020. Apart from this, the company is incurring increased supply chain costs, including pandemic-induced expenses, higher incentive compensation as well as significant investments in marketing and sales. Apart from this, sales in The Kraft Heinz’s Canada segment is declining year over year since the past few quarters. During the fourth quarter, net sales of $447 million declined 2% in the segment, while volume/mix fell 11 percentage points.
Nevertheless, we believe that the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company to stay firm. Notably, shares of The Kraft Heinz have increased 13.4% in the past three months compared with the industry’s 3.4% growth.
Some Top Food Picks
The Hain Celestial (HAIN - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 26.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Medifast, Inc. (MED - Free Report) , currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 17.4%, on average.
The J. M. Smucker Company (SJM - Free Report) , currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 1.7%.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>