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Kraft Heinz (KHC) Up More Than 17% in 6 Months: More Room to Run?
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Strength in the operating model along with solid pricing efforts is working favorably for The Kraft Heinz Company (KHC - Free Report) . Moreover, the company’s efficiency-building plans are impressive.These upsides have led Kraft Heinz’s stock to rally 17.3% in the past six months compared with the industry’s 5.9% growth.
Operating Model Holds Promise
In September 2020, Kraft Heinz laid out a new operating model, which incorporates five key elements — People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. Notably, the Consumer Platforms represents a portfolio of six consumer-driven platforms like Taste Elevation, Easy Meals Made Better and Real Food Snacking, among others. Well, Kraft Heinz is focused on accelerating its international growth strategy based around Taste Elevation and the foodservice platform. In this regard, the company recently signed an agreement to buy sauce-focused business — Assan Foods. Management believes that Assan Foods’ impressive innovation along with its solid distribution network in the booming foodservice channel is likely to help Kraft Heinz expand its brand presence in Turkey.
Image Source: Zacks Investment Research
Ops Center element enables Kraft Heinz to establish an efficient, fast and integrated supply-chain network. In fact, management earlier stated that it expects to achieve nearly $2 billion of gross productivity efficiencies through 2024. Notably, it achieved nearly $400 million of gross productivity efficiencies during 2020. Moreover, management in its last earnings call highlighted that it expects to deliver $400 million worth of gross efficiencies in 2021 as well. Also, the company notified that its Ops team is on track to expand capacity in critical categories.
Further, the Partner Program element is designed to create solid customer partnerships and develop new strategic partnerships. Lastly, the Fuel Our Growth strategy is aimed at investing in growth opportunities, solidifying long-term market position and staying committed to shareholder returns. Also, this strategy will help the company manage its portfolio and accelerate its strategic plan, augment geographic presence, increase focus on growth areas, and undertake sustainable pricing actions.
What Else is Working Favorably for Kraft Heinz?
In terms of cost savings, the company has been increasing visibility and control of its cost components. It is also keeping a close watch on investments made for enhancing sales and customer services. Further, the company is on track with examining its SKUs to remove complexities and boost mix. In this regard, the company’s Ops Center platform has been driving efficiency gains via simplification and waste reduction. Notably, the company benefited from simplifying its assortments and improving capacity through a 16% reduction in SKUs during 2020. Apart from these, solid pricing initiatives have been aiding Kraft Heinz for a while now. In the first quarter, pricing was up 1.5 percentage points year over year, reflecting lower retail promotions and revenue management gains that more than offset unfavorable trade expense timing.
Wrapping Up
During the first quarter, Kraft Heinz’s SG&A expenses increased from $1,088 million to $1,112 million. Moreover, it is seeing a rise in SG&A expenses, excluding impairment losses for a while now. Notably, the metric increased from $862 million reported in the year-ago quarter to $882 million during the first quarter. Apart from these, Kraft Heinz witnessed supply-chain inflation and higher spending due to strategic investments. In fact, these factors put pressure on its adjusted EBITDA during the quarter. Management, in its last earnings call, highlighted that the company expects gross cost inflation in the middle-single-digit range across the full cost basket for 2021.
That being said, focus on cost-saving efforts along with the aforementioned upsides is likely to help this Zacks Rank #3 (Hold) company keep its growth story alive.
Darling Ingredients Inc. (DAR - Free Report) , a Zacks Rank #2 (Buy) stock, has a trailing four-quarter earnings surprise of 29.8%, on average.
Nomad Foods Limited (NOMD - Free Report) , currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 10.3%, on average.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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Kraft Heinz (KHC) Up More Than 17% in 6 Months: More Room to Run?
Strength in the operating model along with solid pricing efforts is working favorably for The Kraft Heinz Company (KHC - Free Report) . Moreover, the company’s efficiency-building plans are impressive.These upsides have led Kraft Heinz’s stock to rally 17.3% in the past six months compared with the industry’s 5.9% growth.
Operating Model Holds Promise
In September 2020, Kraft Heinz laid out a new operating model, which incorporates five key elements — People with Purpose, Consumer Platforms, Ops Center, Partner Program and Fuel Our Growth. Notably, the Consumer Platforms represents a portfolio of six consumer-driven platforms like Taste Elevation, Easy Meals Made Better and Real Food Snacking, among others. Well, Kraft Heinz is focused on accelerating its international growth strategy based around Taste Elevation and the foodservice platform. In this regard, the company recently signed an agreement to buy sauce-focused business — Assan Foods. Management believes that Assan Foods’ impressive innovation along with its solid distribution network in the booming foodservice channel is likely to help Kraft Heinz expand its brand presence in Turkey.
Ops Center element enables Kraft Heinz to establish an efficient, fast and integrated supply-chain network. In fact, management earlier stated that it expects to achieve nearly $2 billion of gross productivity efficiencies through 2024. Notably, it achieved nearly $400 million of gross productivity efficiencies during 2020. Moreover, management in its last earnings call highlighted that it expects to deliver $400 million worth of gross efficiencies in 2021 as well. Also, the company notified that its Ops team is on track to expand capacity in critical categories.
Further, the Partner Program element is designed to create solid customer partnerships and develop new strategic partnerships. Lastly, the Fuel Our Growth strategy is aimed at investing in growth opportunities, solidifying long-term market position and staying committed to shareholder returns. Also, this strategy will help the company manage its portfolio and accelerate its strategic plan, augment geographic presence, increase focus on growth areas, and undertake sustainable pricing actions.
What Else is Working Favorably for Kraft Heinz?
In terms of cost savings, the company has been increasing visibility and control of its cost components. It is also keeping a close watch on investments made for enhancing sales and customer services. Further, the company is on track with examining its SKUs to remove complexities and boost mix. In this regard, the company’s Ops Center platform has been driving efficiency gains via simplification and waste reduction. Notably, the company benefited from simplifying its assortments and improving capacity through a 16% reduction in SKUs during 2020. Apart from these, solid pricing initiatives have been aiding Kraft Heinz for a while now. In the first quarter, pricing was up 1.5 percentage points year over year, reflecting lower retail promotions and revenue management gains that more than offset unfavorable trade expense timing.
Wrapping Up
During the first quarter, Kraft Heinz’s SG&A expenses increased from $1,088 million to $1,112 million. Moreover, it is seeing a rise in SG&A expenses, excluding impairment losses for a while now. Notably, the metric increased from $862 million reported in the year-ago quarter to $882 million during the first quarter. Apart from these, Kraft Heinz witnessed supply-chain inflation and higher spending due to strategic investments. In fact, these factors put pressure on its adjusted EBITDA during the quarter. Management, in its last earnings call, highlighted that the company expects gross cost inflation in the middle-single-digit range across the full cost basket for 2021.
That being said, focus on cost-saving efforts along with the aforementioned upsides is likely to help this Zacks Rank #3 (Hold) company keep its growth story alive.
Better-Ranked Food Bets
Medifast, Inc. (MED - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Darling Ingredients Inc. (DAR - Free Report) , a Zacks Rank #2 (Buy) stock, has a trailing four-quarter earnings surprise of 29.8%, on average.
Nomad Foods Limited (NOMD - Free Report) , currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 10.3%, on average.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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