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Why Is The Kraft Heinz (KHC) Up 3.4% Since the Last Earnings Report?
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It has been about a month since the last earnings report for The Kraft Heinz Company (KHC - Free Report) . Shares have added about 3.4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Kraft Heinz Q1 Earnings & Sales Fall Shy of Estimates
Kraft Heinz posted first-quarter 2017 results wherein both earnings and revenues missed the Zacks Consensus Estimate.
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) and General Mills, Inc. (GIS) 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 $0.84 missed the Zacks Consensus Estimate of $0.85. 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.
Operating Highlights
Gross profit of $2.3 billion was down 3.2% year over year.
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. Adjusted EBITDA margin was 29.6%, down 10 basis points year over year.
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%.
Outlook Skewed Toward Second Half of 2017
The company expects organic sales growth to ramp up toward the second half of 2017. Kraft Heinz remains on track to deliver $1.7 billion cumulative Integration Program savings by the end of 2017.
The company has a wide-ranging pipeline of Big Bets innovations in whitespace in the second quarter and throughout the second half of 2017. The company remains focused on defined strategy of investing, in innovation, marketing, and go-to-market capabilities as it speed up the savings and efficiencies within business.
How Have Estimates Been Moving Since Then?
It turns out fresh estimates have trended downward during the past month. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 5.3% due to these changes.
At this time, The Kraft Heinz's stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. Following the same course, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.
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Why Is The Kraft Heinz (KHC) Up 3.4% Since the Last Earnings Report?
It has been about a month since the last earnings report for The Kraft Heinz Company (KHC - Free Report) . Shares have added about 3.4% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Kraft Heinz Q1 Earnings & Sales Fall Shy of Estimates
Kraft Heinz posted first-quarter 2017 results wherein both earnings and revenues missed the Zacks Consensus Estimate.
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) and General Mills, Inc. (GIS) 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 $0.84 missed the Zacks Consensus Estimate of $0.85. 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.
Operating Highlights
Gross profit of $2.3 billion was down 3.2% year over year.
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. Adjusted EBITDA margin was 29.6%, down 10 basis points year over year.
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%.
Outlook Skewed Toward Second Half of 2017
The company expects organic sales growth to ramp up toward the second half of 2017. Kraft Heinz remains on track to deliver $1.7 billion cumulative Integration Program savings by the end of 2017.
The company has a wide-ranging pipeline of Big Bets innovations in whitespace in the second quarter and throughout the second half of 2017. The company remains focused on defined strategy of investing, in innovation, marketing, and go-to-market capabilities as it speed up the savings and efficiencies within business.
How Have Estimates Been Moving Since Then?
It turns out fresh estimates have trended downward during the past month. There have been four revisions lower for the current quarter. In the past month, the consensus estimate has shifted lower by 5.3% due to these changes.
The Kraft Heinz Company Price and Consensus
The Kraft Heinz Company Price and Consensus | The Kraft Heinz Company Quote
VGM Scores
At this time, The Kraft Heinz's stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. Following the same course, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.