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Kraft Heinz (KHC) Q3 Earnings Beat Estimates, Sales Down Y/Y

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The Kraft Heinz Company (KHC - Free Report) reported third-quarter 2021 results, with the top and the bottom line beating the Zacks Consensus Estimate. However, net sales and earnings declined on a year-over-year basis.

Let’s Delve Deeper

Kraft Heinz posted adjusted earnings of 65 cents a share that beat Zacks Consensus Estimate of 58 cents. However, quarterly earnings declined 7.1% year over year mainly due to reduced adjusted EBITDA, higher equity award compensation expenses and unfavorable changes in other expenses/(income). Lower interest expenses and reduced taxes offered some respite.

The company generated net sales of $6,324 million that inched down 1.8% year over year. Net sales include an adverse impact of 4 percentage point from the divestiture of nuts business (concluded in second-quarter 2021). Favorable currency rates impacted net sales by 0.9 percentage points. The metric came ahead of the Zacks Consensus Estimate of $6,141.4 million. Net sales increased 4.1% from third-quarter 2019 levels.

Organic net sales inched up 1.3% year over year. The metric rose 7.6% from third-quarter 2019 numbers.

The Kraft Heinz Company Price, Consensus and EPS Surprise


The Kraft Heinz Company Price, Consensus and EPS Surprise

The Kraft Heinz Company price-consensus-eps-surprise-chart | The Kraft Heinz Company Quote


The company stated that pricing rose 1.5 percentage points year over year with growth in all reporting segment, reflecting inflation-justified price increases across foodservice and retail channels in all geographies. Management highlighted that it witnessed these gains despite more normalized promotional activities with retailers compared with the prior-year period. Volume/mix fell 0.2 percentage points due to softness when compared with significant pandemic-led retail demand in 2020. These were countered by a rebound in foodservice channels.

Other Operating Highlights

Gross profit of $2,028 million declined 13.5% from $2,344 million reported in the year-ago quarter.

Adjusted EBITDA fell 11.3% to $1,479 million. Excluding a positive 0.6 percentage point impact from currency, the metric benefited from efficiency gains, increased organic net sales and reduced general corporate expenses. These were more than offset by adverse supply chain, key commodity and packaging costs.

Segment Discussion

United States: Net sales of $4,521 million declined 4% year over year. During the quarter, pricing moved up 1.4 percentage points, but volume/mix fell 0.1 percentage points.

International: Net sales of $1,383 million were up 4.4% year over year. Pricing moved up 2.2 percentage points, while volume/mix remained flat.

Canada: Net sales of $420 million rose 3.4% year over year. Pricing moved up 0.2 percentage points but volume/mix declined 2.1 percentage points.

Other Financial Aspects

Kraft Heinz,which shares space with General Mills, Inc. (GIS - Free Report) , ended the quarter with cash and cash equivalents of $2,273 million, long-term debt of $22,937 million and total shareholders’ equity of $50,089 million. Net cash provided by operating activities was $2,448 million for nine months ended Sep 25, 2021. The company generated free cash flow of $1,793 million during this time.

In a separate press release, Kraft Heinz declared a quarterly dividend of 40 cents per share payable on Dec 17, 2021, to shareholders of record as of Nov 26.

Zacks Investment ResearchImage Source: Zacks Investment Research


Considering the impressive to-date performance, Kraft Heinz anticipates 2021 organic net sales to be flat compared with a solid 2020 period. The company raised its 2021 Adjusted EBITDA view to more than $6.2 billion from at least $6.1 billion projected earlier. The increased outlook takes into account better-than-anticipated organic net sales along with the ongoing efforts to manage inflationary pressures. Management stated that the view considers the impacts from the divested nuts business.

The Zacks Rank #2 (Buy) stock has increased 5.1% so far this year compared with the industry’s growth of 1.2%.

Some Solid Food Bets

J & J Snack Foods Corp. (JJSF - Free Report) , currently sporting a Zacks Rank of 1 (Strong Buy), has a trailing four-quarter earnings surprise of 200.4%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

United Natural Foods, Inc. (UNFI - Free Report) , currently flaunting a Zacks Rank #1, has a trailing four-quarter earnings surprise of 13.1%, on average.