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How to Play Kraft Heinz (KHC) Ahead of Q1 Earnings Release?
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As The Kraft Heinz Company (KHC - Free Report) gears up to report its first-quarter 2024 results on May 1, before market open, investors find themselves at a crossroads, evaluating the company's trajectory amid a challenging operational landscape. With quarterly projections indicating a dip in revenue and a stagnant bottom-line figure, the upcoming earnings release prompts a critical question — Should one approach KHC with caution ahead of this event?
The Zacks Consensus Estimate for the to-be-reported quarter’s revenues is pegged at $6.4 billion, suggesting a drop of 1.1% from the prior-year quarter’s levels. The consensus mark for quarterly earnings has remained unchanged in the past 30 days at 68 cents per share, indicating no change from the year-ago quarter’s reported figure. These projections underscore the persistent challenges faced by Kraft Heinz, including inflationary pressures and soft volumes.
The company faces a complex landscape of revenue challenges and earnings uncertainties, dampening its appeal to investors seeking growth opportunities within the consumer goods sector. The company is navigating a challenging terrain marked by inflationary pressures. Consumer spending constraints, amidst a backdrop of higher interest rates and reduced SNAP benefits, are likely to arrest revenue growth.
The struggle to sustain consumer demand amid changing consumer spending patterns is notably impacting sales volumes. Intensified competition from rival brands adds to the challenge. Anticipating this trend, we forecast a 4% decline in overall volume for the to-be-reported quarter.
The persistent rise in supply-chain costs, stemming from inflation in manufacturing and procurement expenses, continues to strain margins.
Nevertheless, Kraft Heinz is leveraging effective pricing strategies, trying to safeguard margins. Focus on growth pillars like Foodservice, Emerging Markets, and U.S. Retail, are offering some respite. The company's transformation endeavors, mainly through initiatives like AGILE@SCALE and innovation programs, are somewhat instrumental in overcoming obstacles.
Stock Performance & Valuation
Shares of Kraft Heinz have registered a modest year-to-date increase of 4.5%, surpassing the Zacks Food - Miscellaneous industry's growth rate of 2.1%. Despite this uptick, the stock remains undervalued compared with its peers.
The company's forward price-to-earnings ratio stands at 12.56X, below both its five-year median of 13.12X and the industry average of 16.75X. This undervaluation may attract value investors seeking opportunities.
However, it's crucial to consider the Zacks Rank of #4 (Sell) assigned to the stock. This indicates that the current stock price does not accurately reflect its intrinsic value, potentially signaling an impending correction. Also, the stock is overbought or influenced by market speculation rather than its fundamental worth.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model does not predict an earnings beat for Kraft Heinz this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as KHC has an Earnings ESP of -0.75% at present.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Bottom Line
In conclusion, as investors weigh the prospects of Kraft Heinz ahead of its Q1 earnings release, the company faces a number of challenges ranging from inflationary pressures to soft volumes and currency headwinds. While cautious optimism may be warranted, given signs of inflation moderation, sustained efforts will be required to address underlying operational issues and restore investor confidence in KHC's growth trajectory. As such, a prudent approach to navigating these uncertainties may be advisable for investors eyeing the company's performance in the near term.
Some Stocks With a Favorable Combination
Here are three companies worth considering, as our model shows that these also have the correct combination to beat on earnings this time:
The Hershey Company (HSY - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3. The company is likely to witness top-line growth when it reports first-quarter 2024 results. The Zacks Consensus Estimate for Hershey’s quarterly revenues is pegged at $3.12 billion, suggesting a rise of 4.5% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hershey’s quarterly earnings is pegged at $2.72, calling for a decline of 8.1% from the year-ago quarter’s levels. HSY has a trailing four-quarter earnings surprise of 6.5%, on average.
Church & Dwight (CHD - Free Report) currently has an Earnings ESP of +1.00% and a Zacks Rank of 3. The company is likely to register top- and bottom-line increases when it reports first-quarter 2024 numbers. The Zacks Consensus Estimate for Church & Dwight’s quarterly revenues is pegged at $1.49 billion, indicating growth of 4.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Church & Dwight’s quarterly earnings of 86 cents suggests a rise of 1.2% from the year-ago quarter’s levels. CHD has a trailing four-quarter earnings surprise of 9.7%, on average.
Coty (COTY - Free Report) currently has an Earnings ESP of +4.23% and a Zacks Rank #3. The company is expected to register top-line growth when it reports third-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for COTY’s quarterly revenues is pegged at $1.37 billion, suggesting an increase of 6.6% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for COTY’s quarterly earnings has been unchanged at 6 cents in the past 30 days, suggesting a 68.4% decline from the year-ago quarter’s reported number. COTY has delivered an earnings beat of 115.3%, on average, in the trailing four quarters.
Image: Bigstock
How to Play Kraft Heinz (KHC) Ahead of Q1 Earnings Release?
As The Kraft Heinz Company (KHC - Free Report) gears up to report its first-quarter 2024 results on May 1, before market open, investors find themselves at a crossroads, evaluating the company's trajectory amid a challenging operational landscape. With quarterly projections indicating a dip in revenue and a stagnant bottom-line figure, the upcoming earnings release prompts a critical question — Should one approach KHC with caution ahead of this event?
The Zacks Consensus Estimate for the to-be-reported quarter’s revenues is pegged at $6.4 billion, suggesting a drop of 1.1% from the prior-year quarter’s levels. The consensus mark for quarterly earnings has remained unchanged in the past 30 days at 68 cents per share, indicating no change from the year-ago quarter’s reported figure. These projections underscore the persistent challenges faced by Kraft Heinz, including inflationary pressures and soft volumes.
Kraft Heinz Company Price and EPS Surprise
Kraft Heinz Company price-eps-surprise | Kraft Heinz Company Quote
Kraft Heinz Walking a Tightrope
The company faces a complex landscape of revenue challenges and earnings uncertainties, dampening its appeal to investors seeking growth opportunities within the consumer goods sector. The company is navigating a challenging terrain marked by inflationary pressures. Consumer spending constraints, amidst a backdrop of higher interest rates and reduced SNAP benefits, are likely to arrest revenue growth.
The struggle to sustain consumer demand amid changing consumer spending patterns is notably impacting sales volumes. Intensified competition from rival brands adds to the challenge. Anticipating this trend, we forecast a 4% decline in overall volume for the to-be-reported quarter.
The persistent rise in supply-chain costs, stemming from inflation in manufacturing and procurement expenses, continues to strain margins.
Nevertheless, Kraft Heinz is leveraging effective pricing strategies, trying to safeguard margins. Focus on growth pillars like Foodservice, Emerging Markets, and U.S. Retail, are offering some respite. The company's transformation endeavors, mainly through initiatives like AGILE@SCALE and innovation programs, are somewhat instrumental in overcoming obstacles.
Stock Performance & Valuation
Shares of Kraft Heinz have registered a modest year-to-date increase of 4.5%, surpassing the Zacks Food - Miscellaneous industry's growth rate of 2.1%. Despite this uptick, the stock remains undervalued compared with its peers.
The company's forward price-to-earnings ratio stands at 12.56X, below both its five-year median of 13.12X and the industry average of 16.75X. This undervaluation may attract value investors seeking opportunities.
However, it's crucial to consider the Zacks Rank of #4 (Sell) assigned to the stock. This indicates that the current stock price does not accurately reflect its intrinsic value, potentially signaling an impending correction. Also, the stock is overbought or influenced by market speculation rather than its fundamental worth.
Image Source: Zacks Investment Research
What the Zacks Model Unveils
Our proven model does not predict an earnings beat for Kraft Heinz this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) increases the odds of an earnings beat. This is not the case here, as KHC has an Earnings ESP of -0.75% at present.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Bottom Line
In conclusion, as investors weigh the prospects of Kraft Heinz ahead of its Q1 earnings release, the company faces a number of challenges ranging from inflationary pressures to soft volumes and currency headwinds. While cautious optimism may be warranted, given signs of inflation moderation, sustained efforts will be required to address underlying operational issues and restore investor confidence in KHC's growth trajectory. As such, a prudent approach to navigating these uncertainties may be advisable for investors eyeing the company's performance in the near term.
Some Stocks With a Favorable Combination
Here are three companies worth considering, as our model shows that these also have the correct combination to beat on earnings this time:
The Hershey Company (HSY - Free Report) has an Earnings ESP of +1.42% and a Zacks Rank #3. The company is likely to witness top-line growth when it reports first-quarter 2024 results. The Zacks Consensus Estimate for Hershey’s quarterly revenues is pegged at $3.12 billion, suggesting a rise of 4.5% from the figure reported in the prior-year quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hershey’s quarterly earnings is pegged at $2.72, calling for a decline of 8.1% from the year-ago quarter’s levels. HSY has a trailing four-quarter earnings surprise of 6.5%, on average.
Church & Dwight (CHD - Free Report) currently has an Earnings ESP of +1.00% and a Zacks Rank of 3. The company is likely to register top- and bottom-line increases when it reports first-quarter 2024 numbers. The Zacks Consensus Estimate for Church & Dwight’s quarterly revenues is pegged at $1.49 billion, indicating growth of 4.3% from the figure reported in the prior-year quarter.
The Zacks Consensus Estimate for Church & Dwight’s quarterly earnings of 86 cents suggests a rise of 1.2% from the year-ago quarter’s levels. CHD has a trailing four-quarter earnings surprise of 9.7%, on average.
Coty (COTY - Free Report) currently has an Earnings ESP of +4.23% and a Zacks Rank #3. The company is expected to register top-line growth when it reports third-quarter fiscal 2024 numbers. The Zacks Consensus Estimate for COTY’s quarterly revenues is pegged at $1.37 billion, suggesting an increase of 6.6% from the prior-year quarter’s reported figure.
The Zacks Consensus Estimate for COTY’s quarterly earnings has been unchanged at 6 cents in the past 30 days, suggesting a 68.4% decline from the year-ago quarter’s reported number. COTY has delivered an earnings beat of 115.3%, on average, in the trailing four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.