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Kraft Heinz (KHC) Benefits From Solid Pricing & Transformation
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Focus on three key strategic growth pillars and transformation plan is favoring The Kraft Heinz Company (KHC - Free Report) . The consumer products company is benefiting from effective pricing actions, which continued in the fourth quarter of 2022, with the top and the bottom line increasing year over year and surpassing the Zacks Consensus Estimate. In fact, KHC ended 2022 on a solid note and remains well-placed for 2023.
Let’s discuss in details.
Pricing Efforts Fuel Growth
Kraft Heinz’s robust pricing actions are helping it mitigate the adverse impacts of cost inflation. Solid pricing initiatives have been aiding Kraft Heinz for a while now. In fourth-quarter 2022, its pricing rose 15.2 percentage points year over year, reflecting growth in both segments. The upside can be attributed to measures undertaken to counter increasing input costs. Robust pricing efforts boosted the company’s quarterly net sales, which came in at $7,381 million, up 10%. Organic net sales increased 10.4%, driven by strength in growth pillars and continued demand for the company’s brands.
Image Source: Zacks Investment Research
Impressive View
Kraft Heinz continues to witness strength due to its core growth pillars while simultaneously focusing on brand-enhancing investments. For the full-year 2023, management expects organic net sales growth of 4-6%. Adjusted EBITDA is expected to increase 2-4% in 2023 on a constant currency or cc basis. Excluding the impact of the 53rd week, it is likely to rise 4-6%. Management expects adjusted gross margin recovery due to pricing and gross efficiencies. Adjusted earnings per share (EPS) for the year are envisioned in the band of $2.67-$2.75.
Growth Efforts on Track
Kraft Heinz’s top line is benefiting from growth in three pillars — Grow Platforms in U.S. Retail, Foodservice and Emerging Markets. In the fourth quarter of 2022, the company’s U.S. Retail GROW platforms increased nearly 15% year over year. Its growth strategy has been working consistently since its transformation began. The company’s foodservice business grew more than 20% during the fourth quarter and full-year 2022, with a solid performance in the North America and International region. Emerging Markets increased nearly 15% in 2022, ahead of total International Zone growth of 12% during 2022.
KHC has been committed to expansion for a while now. On Mar 20, 2023, the company unveiled its expanded partnership with BEES. This partnership will help the company digitize its sales process and spur growth in LATAM. The deal will help Kraft Heinz get access to previously unreachable retailers. It will help grocery store chains, small ‘mom & pop’ shops and foodservice organizations browse and stock a wide range of Kraft Heinz products. Also, the deal is likely to help Kraft Heinz enhance its Emerging Markets strategy by boosting the distribution network and serving the needs of regional retailers in the area.
The company announced AGILE@SCALE in February 2022 to transform its business and unleash its full potential. This strategy will help the company enhance its agile expertise and capabilities through partnerships with technology giants and cutting-edge innovators.
Is all Rosy For Kraft Heinz?
Kraft Heinz has been grappling with the rising inflationary environment for a while now. In its last earnings call, management highlighted that it expects high-single-digit inflation during 2023. In this regard, the company sees higher conversion costs and input costs.
In addition, Kraft Heinz’s significant international presence exposes it to the risk of adverse currency fluctuations. Management expects unfavorable currency rates to hurt 2023 adjusted EPS by 4 cents.
Nevertheless, the abovementioned upsides are likely to keep aiding Kraft Heinz’s growth. The Zacks Rank #3 (Hold) company’s shares have increased 9.7% in the past six months compared with the industry’s 8.7% growth.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the corresponding year-ago reported figures.
Beyond Meat, which develops, manufactures, markets and sells plant-based meat products, currently carries a Zacks Rank #2. BYND has a trailing four-quarter negative earnings surprise of 29.3%, on average.
The Zacks Consensus Estimate for Beyond Meat’s current fiscal-year earnings suggests an increase of 39.7% from the year-ago reported number.
Kimberly Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for Kimberly Clark’s current financial year sales and earnings suggests growth of 1.7% and 5.2%, respectively, from the year-ago reported numbers.
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Kraft Heinz (KHC) Benefits From Solid Pricing & Transformation
Focus on three key strategic growth pillars and transformation plan is favoring The Kraft Heinz Company (KHC - Free Report) . The consumer products company is benefiting from effective pricing actions, which continued in the fourth quarter of 2022, with the top and the bottom line increasing year over year and surpassing the Zacks Consensus Estimate. In fact, KHC ended 2022 on a solid note and remains well-placed for 2023.
Let’s discuss in details.
Pricing Efforts Fuel Growth
Kraft Heinz’s robust pricing actions are helping it mitigate the adverse impacts of cost inflation. Solid pricing initiatives have been aiding Kraft Heinz for a while now. In fourth-quarter 2022, its pricing rose 15.2 percentage points year over year, reflecting growth in both segments. The upside can be attributed to measures undertaken to counter increasing input costs. Robust pricing efforts boosted the company’s quarterly net sales, which came in at $7,381 million, up 10%. Organic net sales increased 10.4%, driven by strength in growth pillars and continued demand for the company’s brands.
Image Source: Zacks Investment Research
Impressive View
Kraft Heinz continues to witness strength due to its core growth pillars while simultaneously focusing on brand-enhancing investments. For the full-year 2023, management expects organic net sales growth of 4-6%. Adjusted EBITDA is expected to increase 2-4% in 2023 on a constant currency or cc basis. Excluding the impact of the 53rd week, it is likely to rise 4-6%. Management expects adjusted gross margin recovery due to pricing and gross efficiencies. Adjusted earnings per share (EPS) for the year are envisioned in the band of $2.67-$2.75.
Growth Efforts on Track
Kraft Heinz’s top line is benefiting from growth in three pillars — Grow Platforms in U.S. Retail, Foodservice and Emerging Markets. In the fourth quarter of 2022, the company’s U.S. Retail GROW platforms increased nearly 15% year over year. Its growth strategy has been working consistently since its transformation began. The company’s foodservice business grew more than 20% during the fourth quarter and full-year 2022, with a solid performance in the North America and International region. Emerging Markets increased nearly 15% in 2022, ahead of total International Zone growth of 12% during 2022.
KHC has been committed to expansion for a while now. On Mar 20, 2023, the company unveiled its expanded partnership with BEES. This partnership will help the company digitize its sales process and spur growth in LATAM. The deal will help Kraft Heinz get access to previously unreachable retailers. It will help grocery store chains, small ‘mom & pop’ shops and foodservice organizations browse and stock a wide range of Kraft Heinz products. Also, the deal is likely to help Kraft Heinz enhance its Emerging Markets strategy by boosting the distribution network and serving the needs of regional retailers in the area.
The company announced AGILE@SCALE in February 2022 to transform its business and unleash its full potential. This strategy will help the company enhance its agile expertise and capabilities through partnerships with technology giants and cutting-edge innovators.
Is all Rosy For Kraft Heinz?
Kraft Heinz has been grappling with the rising inflationary environment for a while now. In its last earnings call, management highlighted that it expects high-single-digit inflation during 2023. In this regard, the company sees higher conversion costs and input costs.
In addition, Kraft Heinz’s significant international presence exposes it to the risk of adverse currency fluctuations. Management expects unfavorable currency rates to hurt 2023 adjusted EPS by 4 cents.
Nevertheless, the abovementioned upsides are likely to keep aiding Kraft Heinz’s growth. The Zacks Rank #3 (Hold) company’s shares have increased 9.7% in the past six months compared with the industry’s 8.7% growth.
Solid Staple Bets
Some better-ranked consumer staple stocks are General Mills (GIS - Free Report) , Beyond Meat (BYND - Free Report) and Kimberly-Clark Corporation (KMB - Free Report) .
General Mills, a branded consumer foods company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the corresponding year-ago reported figures.
Beyond Meat, which develops, manufactures, markets and sells plant-based meat products, currently carries a Zacks Rank #2. BYND has a trailing four-quarter negative earnings surprise of 29.3%, on average.
The Zacks Consensus Estimate for Beyond Meat’s current fiscal-year earnings suggests an increase of 39.7% from the year-ago reported number.
Kimberly Clark is engaged in the manufacture and marketing of a wide range of consumer products around the world. It currently has a Zacks Rank of 2. KMB has a trailing four-quarter earnings surprise of 1.4%, on average.
The Zacks Consensus Estimate for Kimberly Clark’s current financial year sales and earnings suggests growth of 1.7% and 5.2%, respectively, from the year-ago reported numbers.