Back to top

Image: Bigstock

Kraft Heinz (KHC) Q1 Earnings Surpass Estimates, Sales Up

Read MoreHide Full Article

The Kraft Heinz Company (KHC - Free Report) reported first-quarter 2020 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Moreover, sales improved year over year. However, earnings declined from the year-ago quarter’s figure.

The Kraft Heinz Company Price, Consensus and EPS Surprise

 

The Kraft Heinz Company Price, Consensus and EPS Surprise

The Kraft Heinz Company price-consensus-eps-surprise-chart | The Kraft Heinz Company Quote


Q1 in Detail

Adjusted earnings per share of 58 cents surpassed the consensus mark of 54 cents. However, the bottom line fell 12.1% year over year due to decline in other income along with unfavorable changes in non-cash equity award compensation costs. Also, higher taxes were deterrent.

Net sales increased 3.3% year over year to $6,157 million. Also, the figure surpassed the Zacks Consensus Estimate of $6,142 million. Net sales growth included 1.1% and 1.8% unfavorable impacts of currency and divestitures, respectively. Organic sales rose 6.2% on the back of strong consumer demand stemming from to the coronavirus pandemic.

Pricing was up 1.6%, driven by price improvements in the United States and International markets. Volume/mix increased 4.6% on the back of increased at-home consumption.

Operating Highlights

Gross profit of $1,858 million declined 7.6% year over year and gross margin came in at 30.2% in the reported quarter.

Adjusted EBITDA was down 1.1% to $1,415 million in the quarter due to higher general corporate costs along with reduced demand from Canada region.

Segment Discussion

United States: Net sales of $4,495 million increased 6.4% year over year. During the quarter, pricing moved up 2.4% owing to better prices in certain categories. Volume/mix increased 4% on strong growth in various categories like condiments and sauces, ready to drink beverages, and nuts to name a few. However, lower shipments in cold cuts, natural cheese and domestic foodservice acted as deterrents.

The segment’s adjusted EBITDA increased 6.2% to $1,209 million which includes contributions from increased demand related to the COVID-19 pandemic. Higher prices and volumes more than offset the adverse impacts from volume/mix, key commodity cost inflation and increased supply chain expenses.

Canada: Net sales of $361 million declined 19.8% year over year, which included unfavorable impact of divestitures to the tune of 20.7% and a favourable currency impact of 1.3%. Nevertheless, organic sales increased 2.2% year over year driven by increased demand related to the coronavirus outbreak. Pricing dipped 6.4% due to higher trade expenses and reduced prices in foodservice. Volume/mix moved up 8.6% owing to growth in products such as peanut butter and pasta sauce. However, weakness in coffee and reduced foodservice shipment were headwinds.

Segment adjusted EBITDA declined 54% to $55 million due to unfavorable pricing and higher supply chain costs.

International: Net sales of $1301 million increased 1.3% year over year, which included unfavorable impact of divestitures to the tune of 1.1% and a favourable currency impact of 4.5%. Organic sales grew 6.9% year on year. Pricing inched up 1.7% owing to better prices in Latin America, Australia and the U.K. Volume/mix was up 5.2% on growth in retail consumption in both developed and emerging markets. However, reduced shipments in Asia and foodservice were a drag.

Adjusted EBITDA increased 2.5% to $245 million on higher organic net sales.

Financials

Kraft Heinz ended the quarter with cash and cash equivalents of $5,403 million, long-term debt of $31,531 million as well as total shareholders’ equity of $51,009 million.

In a separate press release, the company announced a quarterly dividend of 40 cents per share, which is payable on Jun 26 to shareholders of record as of May 29.

Outlook

For second-quarter 2020, the company anticipates a low to mid-single digit year over year organic net sales growth. During the second quarter, adjusted EBITDA is expected to grow at a mid-single digit on a constant-currency basis. This outlook reflects increased demand from retail customers owing to greater in at-home consumption, especially in developed markets. Also, the outlook takes in account lower demand in foodservice channels worldwide.

Price Performance

We note that the Zacks Rank #2 (Buy) stock has gained 6.7% in the past three months against the industry’s decline of 8.2%.

 



Don’t Miss These Solid Food Stocks

Campbell Soup Company (CPB - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Mills (GIS - Free Report) has a long-term earnings growth rate of 7.5% and a Zacks Rank #2.

Conagra Brands (CAG - Free Report) has a long-term earnings growth rate of 7% and a Zacks Rank #2.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.

This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.

See their latest picks free >>

Published in