It has been about a month since the last earnings report for Kraft Heinz (KHC Quick QuoteKHC - Free Report) . Shares have added about 4.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Kraft Heinz due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Kraft Heinz Raises Profit Guidance on Q3 Earnings Beat

Kraft Heinz posted solid third-quarter 2023 results, wherein the top and bottom lines increased year over year, and earnings came ahead of the Zacks Consensus Estimate. Results continued to gain from sales growth in the company’s three key pillars — foodservice, emerging markets and U.S. Retail Grow platforms. Encouragingly, management raised its adjusted EPS and adjusted EBITDA guidance for 2023.

Quarter in Detail

Kraft Heinz posted adjusted earnings of 72 cents per share, beating the Zacks Consensus Estimate of 66 cents. Quarterly earnings jumped 14.3% year over year, mainly due to increased adjusted EBITDA and positive changes in other expenses/(income), somewhat negated by elevated taxes.

The company generated net sales of $6,570 million, up 1% year over year. Net sales included an unfavorable currency impact of 0.5 percentage points and an adverse impact of 0.2 percentage points from divestitures. Net sales missed the Zacks Consensus Estimate of $6,700 million.

Organic net sales increased 1.7% year over year. Pricing rose 7.1 percentage points year over year, reflecting growth in both segments. The upside can be attributed to higher list prices to counter escalated input costs. The volume/mix fell 5.4 percentage points due to the elasticity effect of pricing actions in both units. Our model suggested pricing to be up 8.5% and volumes to decline 5.9% in the third quarter.

The adjusted gross profit of $2,231 million jumped 14.3% from the figure reported in the year-ago quarter. The adjusted gross margin expanded 396 bps to 34%. We had expected an adjusted gross margin expansion of about 240 basis points.

Adjusted EBITDA advanced 11.9% to $1,565 million due to elevated pricing and efficiency gains. These were somewhat negated by elevated supply-chain costs, an adverse volume/mix, currency headwinds and investments related to marketing, technology and research & development. Supply-chain costs included inflation across procurement and manufacturing costs.

Segment Discussion

North America: Net sales of $4,995 million declined 0.4% year over year. Organic sales fell 0.1%. During the quarter, pricing moved up 5.8 percentage points, but the volume/mix fell 5.9 percentage points.

International: Net sales of $1,575 million were up 5.7% year over year. Organic sales rose 8%, with pricing up 11.6 percentage points, but the volume/mix down 3.6 percentage points.

Other Financial Aspects

Kraft Heinz ended the quarter with cash and cash equivalents of $1,052 million, long-term debt of $19,270 million and total shareholders’ equity of $49,434 million. Net cash provided by operating activities was $2,620 million for the first nine months of 2023. The company has generated free cash flow of $1,841 million year to date.

Guidance

For 2023, management expects organic net sales growth to be at the lower end of its previously guided range of 4-6%.

Adjusted EBITDA is expected to increase 5-7% at cc compared with the 4-6% growth projected earlier. Excluding the impacts of the 53rd week in 2022, the adjusted EBITDA is now likely to rise 7-9% compared with the earlier view of 6-8%.

Management expects an adjusted gross margin expansion, driven by pricing and efficiencies. However, it expects mid-single-digit inflation in 2023. The adjusted gross profit margin is likely to increase 200-250 basis points in 2023 compared with the expansion of 150-200 basis points expected earlier.

The adjusted EPS for the year is now envisioned in the band of $2.91-$2.99, higher than the prior view of $2.83-$2.91. The latest guidance includes a nearly 3-cent expected impact of adverse changes in non-cash pension and post-retirement benefits and a roughly 4-cent adverse impact of currency woes. The bottom-line view also includes an adverse 6-cent impact from lapping the 53rd week in 2022.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Kraft Heinz has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Kraft Heinz has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Kraft Heinz belongs to the Zacks Food - Miscellaneous industry. Another stock from the same industry, Sysco (SYY Quick QuoteSYY - Free Report) , has gained 9.9% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Sysco reported revenues of $19.62 billion in the last reported quarter, representing a year-over-year change of +2.6%. EPS of $1.07 for the same period compares with $0.97 a year ago.

For the current quarter, Sysco is expected to post earnings of $0.88 per share, indicating a change of +10% from the year-ago quarter. The Zacks Consensus Estimate has changed +2.3% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Sysco. Also, the stock has a VGM Score of A.