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Kraft Heinz (KHC) Looks Appetizing on Pricing & Transformation
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Effective pricing strategies are working well for The Kraft Heinz Company (KHC - Free Report) . The consumer products company is keen on transforming its business to unleash its full potential. The company is focused on strategic growth pillars, which is noteworthy. That being said, the company is not immune to cost inflation.
Let’s delve deeper.
Pricing Drives Growth
Kraft Heinz is undertaking strategic pricing initiatives to improve its performance. In fact, robust pricing strategies have been shielding margin performance amid inflation. In the third quarter of 2023, the company’s organic net sales increased 1.7% on favorable pricing to the tune of 7.1 percentage points — stemming from higher list prices to counter escalated input costs. Adjusted gross margin expanded 396 basis points (bps) to 34%, driven by pricing actions undertaken to offset inflation, solid gross supply chain efficiencies and a favorable mix in North America. The continuation of this trend is likely to keep protecting the company’s margin performance.
Transformation Efforts Hold Promise
Kraft Heinz is committed to accelerating its profit and enhancing the long-term shareholders’ value. As part of its transformation phase, management unveiled AGILE@SCALE in February 2022. The strategy helps Kraft Heinz to improve its agile expertise and capabilities via partnerships with technology giants and cutting-edge innovators.
Management is on track to build its innovation pipeline aided by the Agile Innovation Engine. Strength in Kraft Heinz’s AGILE@SCALE and strategic partnerships are generating solutions throughout the value chain to drive growth and efficiency. As part of the AGILE@SCALE strategy, management is building digital-first solutions to fuel gross efficiencies.
Kraft Heinz is benefiting from strength in its three key pillars — Foodservice, Emerging Markets and U.S. Retail Grow platforms. In the Foodservice business, management prioritizes higher margin spaces and undertakes customer-friendly innovations to drive growth. Kraft Heinz’s data-driven and repeatable go-to-market model has been yielding across emerging markets. Strength in the company’s Heinz brand bodes well in such markets.
High Costs Stay
Mondelez has been battling cost inflation for a while now. Although offset by pricing, product mix and lower manufacturing expenses, the company’s adjusted gross margin was affected by escalated raw material and transportation costs in the third quarter of 2023. The adjusted operating margin was also partially hurt by input cost inflation. In its third-quarter 2023 earnings release, Mondelez stated that it still expects a double-digit increase in inflation.
Focus on growth endeavors is likely to help Kraft Heinz stay afloat amid such cost hurdles.
The Zacks Rank #3 (Hold) company’s shares have increased 16.9% in the past three months compared with the industry’s 11.8% growth.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2. SYY delivered a positive earnings surprise in the last two quarters.
The Zacks Consensus Estimate for Sysco’s current fiscal year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the corresponding year-ago reported figure.
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Kraft Heinz (KHC) Looks Appetizing on Pricing & Transformation
Effective pricing strategies are working well for The Kraft Heinz Company (KHC - Free Report) . The consumer products company is keen on transforming its business to unleash its full potential. The company is focused on strategic growth pillars, which is noteworthy. That being said, the company is not immune to cost inflation.
Let’s delve deeper.
Pricing Drives Growth
Kraft Heinz is undertaking strategic pricing initiatives to improve its performance. In fact, robust pricing strategies have been shielding margin performance amid inflation. In the third quarter of 2023, the company’s organic net sales increased 1.7% on favorable pricing to the tune of 7.1 percentage points — stemming from higher list prices to counter escalated input costs. Adjusted gross margin expanded 396 basis points (bps) to 34%, driven by pricing actions undertaken to offset inflation, solid gross supply chain efficiencies and a favorable mix in North America. The continuation of this trend is likely to keep protecting the company’s margin performance.
Transformation Efforts Hold Promise
Kraft Heinz is committed to accelerating its profit and enhancing the long-term shareholders’ value. As part of its transformation phase, management unveiled AGILE@SCALE in February 2022. The strategy helps Kraft Heinz to improve its agile expertise and capabilities via partnerships with technology giants and cutting-edge innovators.
Management is on track to build its innovation pipeline aided by the Agile Innovation Engine. Strength in Kraft Heinz’s AGILE@SCALE and strategic partnerships are generating solutions throughout the value chain to drive growth and efficiency. As part of the AGILE@SCALE strategy, management is building digital-first solutions to fuel gross efficiencies.
Kraft Heinz is benefiting from strength in its three key pillars — Foodservice, Emerging Markets and U.S. Retail Grow platforms. In the Foodservice business, management prioritizes higher margin spaces and undertakes customer-friendly innovations to drive growth. Kraft Heinz’s data-driven and repeatable go-to-market model has been yielding across emerging markets. Strength in the company’s Heinz brand bodes well in such markets.
High Costs Stay
Mondelez has been battling cost inflation for a while now. Although offset by pricing, product mix and lower manufacturing expenses, the company’s adjusted gross margin was affected by escalated raw material and transportation costs in the third quarter of 2023. The adjusted operating margin was also partially hurt by input cost inflation. In its third-quarter 2023 earnings release, Mondelez stated that it still expects a double-digit increase in inflation.
Focus on growth endeavors is likely to help Kraft Heinz stay afloat amid such cost hurdles.
The Zacks Rank #3 (Hold) company’s shares have increased 16.9% in the past three months compared with the industry’s 11.8% growth.
Top 3 Staple Bets
MGP Ingredients, Inc. (MGPI - Free Report) produces and markets ingredients and distillery products to the packaged goods industry. The company currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for MGP Ingredients’ current financial year sales and earnings suggests growth of almost 6% and 14.2%, respectively, from the year-ago reported figures. MGPI has a trailing four-quarter earnings surprise of 16.2% on average.
Vital Farms Inc. (VITL - Free Report) offers a range of produced pasture-raised foods. It currently carries a Zacks Rank #2. VITL has a trailing four-quarter earnings surprise of 145% on average.
The Zacks Consensus Estimate for Vital Farms’ current financial year sales suggests growth of 29.4% from the year-ago reported figure.
Sysco Corporation (SYY - Free Report) , a food and related product company, currently has a Zacks Rank #2. SYY delivered a positive earnings surprise in the last two quarters.
The Zacks Consensus Estimate for Sysco’s current fiscal year sales and earnings suggests growth of 4.1% and almost 8%, respectively, from the corresponding year-ago reported figure.