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Kraft Heinz (KHC) Q1 Earnings Surpass Estimates, Sales Up
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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
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%.
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.
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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.
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Kraft Heinz (KHC) Q1 Earnings Surpass Estimates, Sales Up
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-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 >>