Why This Solid Bottom Line Beat Isn’t Holding Up Kraft Heinz
Kraft Heinz reported better than expected second-quarter financial results before the markets opened on Thursday, but shares fell anyway.
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When Kraft Heinz Co. (NASDAQ: KHC | KHC Price Prediction) reported its second-quarter financial results before the markets opened on Thursday, the packaged foods company said that it had $0.80 in earnings per share (EPS) and $6.65 billion in revenue. The consensus estimates had called for $0.65 in EPS and revenue of $6.54 billion, and the same period of last year reportedly had EPS of $0.78 on $6.41 billion in revenue.
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During the latest quarter, net sales increased 3.8% year over year, despite a −2.1% impact from divestitures and an unfavorable 1.5% point impact from currency. Organic Net Sales increased 7.4%, driven by increased retail demand that more than offset lower foodservice-related sales, a result of the COVID-19 pandemic.
Volume/mix grew 5.2% as strong consumer demand in retail, together with a partial recovery in retail inventory levels from the end of the first quarter, more than offset significant declines in foodservice-related sales.
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In terms of its segments, Kraft Heinz reported as follows:
- United States net sales increased 8.5% year over year to $4.92 billion.
- International net sales decreased by less than 1% to $1.31 billion.
- Canada net sales decreased by 24% to $426 million.
One other highlight from this quarter was that Kraft Heinz wrote down the value of four reporting units by roughly $1.8 billion. These include charges at its U.S. and Canadian foodservice businesses, which supply restaurants, cafeterias and such. At the same time, the company took $1.1 billion off the value of Oscar Mayer, Maxwell House and seven other brands.
At the end of the quarter, cash and cash equivalents totaled $2.81 billion, up from $2.28 billion at the end of the previous fiscal year.
Kraft Heinz stock traded down about 4% on Thursday to $34.22, in a 52-week range of $19.99 to $35.87. The consensus price target is $33.47.
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Chris Lange is a writer for 24/7 Wall St., based in Houston. He has covered financial markets over the past decade with an emphasis on healthcare, tech, and IPOs. During this time, he has published thousands of articles with insightful analysis across these complex fields. Currently, Lange's focus is on military and geopolitical topics. Lange's work has been quoted or mentioned in Forbes, The New York Times, Business Insider, USA Today, MSN, Yahoo, The Verge, Vice, The Intelligencer, Quartz, Nasdaq, The Motley Fool, Fox Business, International Business Times, The Street, Seeking Alpha, Barron’s, Benzinga, and many other major publications. A graduate of Southwestern University in Georgetown, Texas, Lange majored in business with a particular focus on investments. He has previous experience in the banking industry and startups.
