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Kraft Heinz (KHC) Poised on Solid Operating Model, Pricing Efforts
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The Kraft Heinz Company (KHC - Free Report) looks well positioned, courtesy of strength in its operating model, which was laid out in September last year. Moreover, the company’s solid pricing efforts and efficiency building plans look impressive.
Let’s delve deeper.
Operating Model: Key Driver
Kraft Heinz is committed to its operating model, which incorporates five key elements — People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. Notably, the Consumer Platforms represents a portfolio of six consumer-driven platforms like Taste Elevation, Easy Meals Made Better as well as Real Food Snacking among others. In first-quarter 2021 earnings call, management highlighted that its priority platforms and geographies continued to witness solid growth.
Ops Center element will enable Kraft Heinz to establish an efficient, fast and integrated supply chain network. In fact, management earlier stated that it expects to achieve nearly $2 billion of gross productivity efficiencies through 2024. Notably, it achieved nearly $400 million of gross productivity efficiencies during 2020. Moreover, management in its last earnings call highlighted that it expects to deliver $400 million worth of gross efficiencies in 2021 as well. Also, the company notified that its Ops team is on track to expand capacity in critical categories.
Further, Partner Program element is designed to create solid customer partnerships and develop new strategic partnerships. Lastly, the Fuel Our Growth strategy is aimed at investing in growth opportunities, solidify its long-term market position as well as stay committed to shareholder 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.
What Else is Narrating Kraft Heinz’s Growth Story?
Solid pricing initiatives have been aiding Kraft Heinz for a while now. In first-quarter 2021, pricing was up 1.5 percentage points year over year, reflecting lower retail promotions and revenue management gains that more than offset unfavorable trade expense timing. In terms of cost savings, the company has been increasing visibility and control of its cost components. It is also keeping a close watch on investments made for enhancing sales and customer services. Further, the company is on track with examining its SKU’s to remove complexities and boost mix. In this regard, the company’s Ops Center platform has been driving efficiency gains via simplification and waste reduction. Notably, the company benefited from simplifying its assortment and improving capacity through a 16% reduction in SKUs during 2020.
Hurdles on Way
During the first quarter, Kraft Heinz’s SG&A expenses increased from $1,088 million to $1,112 million. Moreover, Kraft Heinz is seeing a rise in SG&A expenses, excluding impairment losses for a while now. Notably, the metric increased from $862 million reported in the year-ago quarter to $882 million during the first quarter. Apart from this, Kraft Heinz witnessed supply chain inflation and higher spending owing to strategic investments. In fact, these factors put pressure on its adjusted EBITDA during the quarter. Management, in its last earnings call, highlighted that the company expects gross cost inflation in the middle-single-digit range across full cost basket for 2021.
Nevertheless, the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles. Notably, shares of Kraft Heinz have surged 34.4% in the past six months compared with the industry’s 13.5% growth.
United Natural Foods, Inc. (UNFI - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 13.6%, on average.
Pilgrim’s Pride Corporation (PPC - Free Report) , currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 27%.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
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Kraft Heinz (KHC) Poised on Solid Operating Model, Pricing Efforts
The Kraft Heinz Company (KHC - Free Report) looks well positioned, courtesy of strength in its operating model, which was laid out in September last year. Moreover, the company’s solid pricing efforts and efficiency building plans look impressive.
Let’s delve deeper.
Operating Model: Key Driver
Kraft Heinz is committed to its operating model, which incorporates five key elements — People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. Notably, the Consumer Platforms represents a portfolio of six consumer-driven platforms like Taste Elevation, Easy Meals Made Better as well as Real Food Snacking among others. In first-quarter 2021 earnings call, management highlighted that its priority platforms and geographies continued to witness solid growth.
Ops Center element will enable Kraft Heinz to establish an efficient, fast and integrated supply chain network. In fact, management earlier stated that it expects to achieve nearly $2 billion of gross productivity efficiencies through 2024. Notably, it achieved nearly $400 million of gross productivity efficiencies during 2020. Moreover, management in its last earnings call highlighted that it expects to deliver $400 million worth of gross efficiencies in 2021 as well. Also, the company notified that its Ops team is on track to expand capacity in critical categories.
Further, Partner Program element is designed to create solid customer partnerships and develop new strategic partnerships. Lastly, the Fuel Our Growth strategy is aimed at investing in growth opportunities, solidify its long-term market position as well as stay committed to shareholder 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.
What Else is Narrating Kraft Heinz’s Growth Story?
Solid pricing initiatives have been aiding Kraft Heinz for a while now. In first-quarter 2021, pricing was up 1.5 percentage points year over year, reflecting lower retail promotions and revenue management gains that more than offset unfavorable trade expense timing. In terms of cost savings, the company has been increasing visibility and control of its cost components. It is also keeping a close watch on investments made for enhancing sales and customer services. Further, the company is on track with examining its SKU’s to remove complexities and boost mix. In this regard, the company’s Ops Center platform has been driving efficiency gains via simplification and waste reduction. Notably, the company benefited from simplifying its assortment and improving capacity through a 16% reduction in SKUs during 2020.
Hurdles on Way
During the first quarter, Kraft Heinz’s SG&A expenses increased from $1,088 million to $1,112 million. Moreover, Kraft Heinz is seeing a rise in SG&A expenses, excluding impairment losses for a while now. Notably, the metric increased from $862 million reported in the year-ago quarter to $882 million during the first quarter. Apart from this, Kraft Heinz witnessed supply chain inflation and higher spending owing to strategic investments. In fact, these factors put pressure on its adjusted EBITDA during the quarter. Management, in its last earnings call, highlighted that the company expects gross cost inflation in the middle-single-digit range across full cost basket for 2021.
Nevertheless, the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles. Notably, shares of Kraft Heinz have surged 34.4% in the past six months compared with the industry’s 13.5% growth.
Some Solid Food Bets
Medifast, Inc. (MED - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
United Natural Foods, Inc. (UNFI - Free Report) , currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 13.6%, on average.
Pilgrim’s Pride Corporation (PPC - Free Report) , currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 27%.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>