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Kraft Heinz (KHC) Q1 Earnings & Sales Fall Shy of Estimates
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The Kraft Heinz Company (KHC - Free Report) posted first-quarter 2017 results wherein both earnings and revenues missed the Zacks Consensus Estimate. Notably, the company’s shares were down 1.62% in after-hours trading on May 3, in response to sluggish sales.
The company has been witnessing weakness in top-line for the last several quarters. Soft spending by U.S. shoppers along with rapid changes in consumer preferences and behavior are hurting the company’s categories. Kraft Heinz, like many other U.S. food producers, Mondelez International, Inc. (MDLZ - Free Report) and General Mills, Inc. (GIS - Free Report) among others, has been struggling due to the shift in consumer preference toward natural and organic ingredients over packaged and processed food.
Earnings
Adjusted earnings per share of 84 cents missed the Zacks Consensus Estimate of 85 cents. However, earnings grew 15.1% year over year on significant gains because of cost-savings initiatives.
Sales
Reported sales of $6.36 billion fell shy of the Zacks Consensus Estimate of $6.46 billion by 1.5% and also declined 3.1% year over year due to soft consumer demand in North America and Canada. Notably, the company’s sales have now declined in four of the past five quarters and Kraft Heinz expects sales growth to ramp up in the second half of 2017. The reported figure includes an unfavorable 0.4% impact from currency.
Volume/mix decreased 3.7% in the quarter as against a 1.7% increase in the previous quarter. The slump was due to weak demand across its brands in its biggest market, the U.S. Pricing was up 1% in the quarter compared with down 0.1% in the preceding quarter.
Adjusted EBITDA was down 3.4% to $1.89 billion in the first quarter due to a decline in net sales in the U.S. and Canada that partly offset cost savings from restructuring activities and pricing gains in the U.S.
Quarterly Segment Discussion
U.S.: Net sales of $4.55 billion declined 3.5% year over year. Organic sales dropped 3.5% on lower volumes. Volume/mix decreased 4.2% in the quarter in comparison to a 1.4% growth in the last quarter. Pricing inched up 0.7%.
The downside was mainly due to weak demand across categories as well as select distribution losses in the club channel.
Foodservice, cheese, meats and nuts categories were mostly affected. However, lunchables, and innovation-led growth in frozen meals and macaroni and cheese continued to witness growth.
Canada: Net sales of $443 million declined 12.2% year over year despite a 2.7% favorable impact from currency. Organically, its sales declined 14.9%. Volume/mix dropped 13.9% due to a combination of reduced in-store activity and discontinuation of certain products at retail.
Pricing decreased 1% versus 3.1% decrease last quarter.
Europe: Net sales of $543 million declined 6.8% year over year due to 6.6% currency headwinds. Organically, sales fell 0.2% amid a challenging consumer and retail environment. Volume/mix was up 0.4% against 1% in the preceding quarter as growth in condiments and sauces in the U.K. was partially offset by ongoing consumption weakness in Italy and the Netherlands. Pricing declined 0.6%.
Rest of World: Net sales of $826 million increased 7.5% year over year. Organically, sales grew 8.1% on higher volume/mix and pricing. While pricing increased 5.1%, volume/mix rose 3%.
Mondelez International, Inc. reported first-quarter 2017 results, with both earnings and revenues surpassing the Zacks Consensus Estimate. Cost-saving initiatives as well as good pricing mainly in Latin America helped the company post better-than-expected results.
The Hershey Company’s (HSY - Free Report) earnings beat the Zacks Consensus Estimate, while sales missed the same in first-quarter 2017. The leading chocolate manufacturer also updated its expectations for 2017.
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Image: Bigstock
Kraft Heinz (KHC) Q1 Earnings & Sales Fall Shy of Estimates
The Kraft Heinz Company (KHC - Free Report) posted first-quarter 2017 results wherein both earnings and revenues missed the Zacks Consensus Estimate. Notably, the company’s shares were down 1.62% in after-hours trading on May 3, in response to sluggish sales.
The company has been witnessing weakness in top-line for the last several quarters. Soft spending by U.S. shoppers along with rapid changes in consumer preferences and behavior are hurting the company’s categories. Kraft Heinz, like many other U.S. food producers, Mondelez International, Inc. (MDLZ - Free Report) and General Mills, Inc. (GIS - Free Report) among others, has been struggling due to the shift in consumer preference toward natural and organic ingredients over packaged and processed food.
Earnings
Adjusted earnings per share of 84 cents missed the Zacks Consensus Estimate of 85 cents. However, earnings grew 15.1% year over year on significant gains because of cost-savings initiatives.
Sales
Reported sales of $6.36 billion fell shy of the Zacks Consensus Estimate of $6.46 billion by 1.5% and also declined 3.1% year over year due to soft consumer demand in North America and Canada. Notably, the company’s sales have now declined in four of the past five quarters and Kraft Heinz expects sales growth to ramp up in the second half of 2017. The reported figure includes an unfavorable 0.4% impact from currency.
Organically (excluding currency), sales declined 2.7%.
Volume/mix decreased 3.7% in the quarter as against a 1.7% increase in the previous quarter. The slump was due to weak demand across its brands in its biggest market, the U.S. Pricing was up 1% in the quarter compared with down 0.1% in the preceding quarter.
Adjusted EBITDA was down 3.4% to $1.89 billion in the first quarter due to a decline in net sales in the U.S. and Canada that partly offset cost savings from restructuring activities and pricing gains in the U.S.
Quarterly Segment Discussion
U.S.: Net sales of $4.55 billion declined 3.5% year over year. Organic sales dropped 3.5% on lower volumes. Volume/mix decreased 4.2% in the quarter in comparison to a 1.4% growth in the last quarter. Pricing inched up 0.7%.
The downside was mainly due to weak demand across categories as well as select distribution losses in the club channel.
Foodservice, cheese, meats and nuts categories were mostly affected. However, lunchables, and innovation-led growth in frozen meals and macaroni and cheese continued to witness growth.
Canada: Net sales of $443 million declined 12.2% year over year despite a 2.7% favorable impact from currency. Organically, its sales declined 14.9%. Volume/mix dropped 13.9% due to a combination of reduced in-store activity and discontinuation of certain products at retail.
Pricing decreased 1% versus 3.1% decrease last quarter.
Europe: Net sales of $543 million declined 6.8% year over year due to 6.6% currency headwinds. Organically, sales fell 0.2% amid a challenging consumer and retail environment. Volume/mix was up 0.4% against 1% in the preceding quarter as growth in condiments and sauces in the U.K. was partially offset by ongoing consumption weakness in Italy and the Netherlands. Pricing declined 0.6%.
Rest of World: Net sales of $826 million increased 7.5% year over year. Organically, sales grew 8.1% on higher volume/mix and pricing. While pricing increased 5.1%, volume/mix rose 3%.
Kraft Heinz currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Kraft Heinz Company Price, Consensus and EPS Surprise
The Kraft Heinz Company Price, Consensus and EPS Surprise | The Kraft Heinz Company Quote
Peer Releases
Mondelez International, Inc. reported first-quarter 2017 results, with both earnings and revenues surpassing the Zacks Consensus Estimate. Cost-saving initiatives as well as good pricing mainly in Latin America helped the company post better-than-expected results.
The Hershey Company’s (HSY - Free Report) earnings beat the Zacks Consensus Estimate, while sales missed the same in first-quarter 2017. The leading chocolate manufacturer also updated its expectations for 2017.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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