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Kraft Heinz (KHC) Q1 Earnings Beat Estimates, EBITDA View Up
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The Kraft Heinz Company (KHC - Free Report) posted first-quarter 2023 results, wherein the top and bottom lines rose year over year and came ahead of the Zacks Consensus Estimate. Sales grew in both North America and the International regions, and results continued to gain from strength in foodservice, emerging markets and U.S. Retail GROW platforms.
Management raised its adjusted EBITDA and adjusted earnings per share (EPS) view for 2023 while keeping the organic net sales growth guidance unchanged.
Quarter in Detail
Kraft Heinz posted adjusted earnings of 68 cents a share, beating the Zacks Consensus Estimate of 60 cents and our estimate of 58 cents. Quarterly earnings jumped 13.3% year over year, mainly due to increased adjusted EBITDA and reduced interest expenses. These were partly negated by adverse changes in other expenses/(income) and elevated taxes on adjusted earnings.
Kraft Heinz Company Price, Consensus and EPS Surprise
The company generated net sales of $6,489 million, up 7.3% year over year. Net sales included an unfavorable currency impact of 2.1 percentage points. Net sales beat the Zacks Consensus Estimate of $6,386 million and our estimate of $6,294.7 million.
Organic net sales increased 9.4% year over year. Pricing rose 14.7 percentage points year over year, reflecting growth in both segments. The upside can be attributed to higher list prices. The volume/mix fell 5.3 percentage points due to the elasticity effect of pricing actions.
The gross profit of $2,113 million jumped by 9.4% from the figure reported in the year-ago quarter. Adjusted EBITDA advanced 10.3% to $1,480 million due to elevated pricing and efficiency gains. These were somewhat negated by elevated supply-chain costs, increased commodity costs, an adverse volume/mix, escalated general corporate expenses, currency headwinds and the adverse effect of Cyclone Gabrielle in New Zealand.
Escalated commodity costs included high costs across soybean and vegetable oils, energy and sweeteners. Supply-chain costs included inflation across procurement and manufacturing costs.
Segment Discussion
North America: Net sales of $4,885 million increased 6.2% year over year. During the quarter, pricing moved up 13.2 percentage points, but the volume/mix fell 6.5 percentage points.
International: Net sales of $1,604 million were up 11.1% year over year. Pricing moved up 19.3 percentage points, but the volume/mix slipped 1.2 percentage points.
Other Financial Aspects
Kraft Heinz ended the quarter with cash and cash equivalents of $826 million, long-term debt of $19,263 million and total shareholders’ equity of $49,313 million. Net cash provided by operating activities was $486 million for the first quarter of 2023. The company generated free cash flow of $220 million year to date.
In a separate press release, Kraft Heinz declared a quarterly dividend of 40 cents per share, payable on Jun 30, 2023, to shareholders of record as of Jun 6.
Guidance
For the full-year 2023, management continues to expect organic net sales growth of 4-6%.
Adjusted EBITDA is now expected to increase 4-6% in 2023 on a constant currency or cc basis. Excluding the impact of the 53rd week in 2022, it is likely to rise 6-8%. Earlier, adjusted EBITDA was expected to increase 2-4% at cc. Excluding the impact of the 53rd week, it was anticipated to rise 4-6%.
Management expects an adjusted gross margin recovery due to pricing and gross efficiencies. However, it expects high-single-digit inflation in 2023, including low-double-digit inflation in the first half and mid-single-digit inflation in the second half of the year. The adjusted gross profit margin is likely to increase 125-175 basis points in 2023.
The adjusted EPS for the year is now envisioned in the band of $2.83-$2.91, which includes a nearly 4-cent expected impact of adverse changes in non-cash pension and post-retirement benefits and a roughly 2-cent impact of currency woes. The adjusted EPS was earlier expected in the range of $2.67-$2.75.
Shares of this Zacks Rank #3 (Hold) company have risen 3.8% in the past six months compared with the industry’s growth of 6.7%.
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS suggests an increase of 116.8% from the year-ago reported number.
General Mills, a food and beverage product company, currently has a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
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.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests an increase of 7.1% and 16.5%, respectively, from the year-ago reported number.
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Kraft Heinz (KHC) Q1 Earnings Beat Estimates, EBITDA View Up
The Kraft Heinz Company (KHC - Free Report) posted first-quarter 2023 results, wherein the top and bottom lines rose year over year and came ahead of the Zacks Consensus Estimate. Sales grew in both North America and the International regions, and results continued to gain from strength in foodservice, emerging markets and U.S. Retail GROW platforms.
Management raised its adjusted EBITDA and adjusted earnings per share (EPS) view for 2023 while keeping the organic net sales growth guidance unchanged.
Quarter in Detail
Kraft Heinz posted adjusted earnings of 68 cents a share, beating the Zacks Consensus Estimate of 60 cents and our estimate of 58 cents. Quarterly earnings jumped 13.3% year over year, mainly due to increased adjusted EBITDA and reduced interest expenses. These were partly negated by adverse changes in other expenses/(income) and elevated taxes on adjusted earnings.
Kraft Heinz Company Price, Consensus and EPS Surprise
Kraft Heinz Company price-consensus-eps-surprise-chart | Kraft Heinz Company Quote
The company generated net sales of $6,489 million, up 7.3% year over year. Net sales included an unfavorable currency impact of 2.1 percentage points. Net sales beat the Zacks Consensus Estimate of $6,386 million and our estimate of $6,294.7 million.
Organic net sales increased 9.4% year over year. Pricing rose 14.7 percentage points year over year, reflecting growth in both segments. The upside can be attributed to higher list prices. The volume/mix fell 5.3 percentage points due to the elasticity effect of pricing actions.
The gross profit of $2,113 million jumped by 9.4% from the figure reported in the year-ago quarter. Adjusted EBITDA advanced 10.3% to $1,480 million due to elevated pricing and efficiency gains. These were somewhat negated by elevated supply-chain costs, increased commodity costs, an adverse volume/mix, escalated general corporate expenses, currency headwinds and the adverse effect of Cyclone Gabrielle in New Zealand.
Escalated commodity costs included high costs across soybean and vegetable oils, energy and sweeteners. Supply-chain costs included inflation across procurement and manufacturing costs.
Segment Discussion
North America: Net sales of $4,885 million increased 6.2% year over year. During the quarter, pricing moved up 13.2 percentage points, but the volume/mix fell 6.5 percentage points.
International: Net sales of $1,604 million were up 11.1% year over year. Pricing moved up 19.3 percentage points, but the volume/mix slipped 1.2 percentage points.
Other Financial Aspects
Kraft Heinz ended the quarter with cash and cash equivalents of $826 million, long-term debt of $19,263 million and total shareholders’ equity of $49,313 million. Net cash provided by operating activities was $486 million for the first quarter of 2023. The company generated free cash flow of $220 million year to date.
In a separate press release, Kraft Heinz declared a quarterly dividend of 40 cents per share, payable on Jun 30, 2023, to shareholders of record as of Jun 6.
Guidance
For the full-year 2023, management continues to expect organic net sales growth of 4-6%.
Adjusted EBITDA is now expected to increase 4-6% in 2023 on a constant currency or cc basis. Excluding the impact of the 53rd week in 2022, it is likely to rise 6-8%. Earlier, adjusted EBITDA was expected to increase 2-4% at cc. Excluding the impact of the 53rd week, it was anticipated to rise 4-6%.
Management expects an adjusted gross margin recovery due to pricing and gross efficiencies. However, it expects high-single-digit inflation in 2023, including low-double-digit inflation in the first half and mid-single-digit inflation in the second half of the year. The adjusted gross profit margin is likely to increase 125-175 basis points in 2023.
The adjusted EPS for the year is now envisioned in the band of $2.83-$2.91, which includes a nearly 4-cent expected impact of adverse changes in non-cash pension and post-retirement benefits and a roughly 2-cent impact of currency woes. The adjusted EPS was earlier expected in the range of $2.67-$2.75.
Shares of this Zacks Rank #3 (Hold) company have risen 3.8% in the past six months compared with the industry’s growth of 6.7%.
Solid Consumer Staple Picks
Some better-ranked consumer staple stocks are Lamb Weston (LW - Free Report) , General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) .
Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS suggests an increase of 116.8% from the year-ago reported number.
General Mills, a food and beverage product company, currently has a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
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.
Conagra Brands, which operates as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.
The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests an increase of 7.1% and 16.5%, respectively, from the year-ago reported number.