Why Kraft Heinz Is Still Not Palatable for Investors

Print Email

Kraft Heinz Co. (NASDAQ: KHC) released a delayed first half (first and second quarter combined) earnings report before the markets opened on Thursday. The first-quarter report was delayed as the result of a Securities and Exchange Commission investigation of its accounting practices.

For the first quarter, Kraft Heinz said it had $0.66 in earnings per share (EPS) and $5.96 billion in revenue. Consensus estimates from Bloomberg were calling for $0.61 in EPS and $6.06 billion in revenue.

For the second quarter, the firm posted $0.78 in EPS and $6.41 billion in revenue, while consensus estimates had called for $0.75 in EPS and $6.59 billion in revenue.

Back in February, Kraft Heinz revealed a massive $15 billion write-down of its Kraft and Oscar Mayer brands and slashed its dividend by 36% to $0.400 per share from $0.625 per share. This most recent report revealed an additional $1 billion in impairments due to the investigation.

For the six months ended June 29, 2019, net sales were $12.4 billion, down 4.8% versus the year-ago period, including an unfavorable 2.6 percentage point impact from currency and a net 0.7 percentage point negative impact from acquisitions and divestitures. Organic net sales decreased 1.5% from the year-ago period.

The company did not offer any guidance in the report. However, consensus estimates are calling for $2.77 in EPS and $25.72 billion in revenue for the full year.

Miguel Patricio, Kraft Heinz CEO, commented:

The level of decline we experienced in the first half of this year is nothing we should find acceptable moving forward. We have significant work ahead of us to set our strategic priorities and change the trajectory of our business. But in my short time with the company, I have developed a strong appreciation for the affinity consumers around the world continue to have for our brands, the talent and determination of our employees, as well as the commitment of our customers. We have a lot to work with and build upon, and our team is motivated by the opportunity to drive the next phase of growth and profitability for Kraft Heinz and our shareholders.

Shares of Kraft Heinz closed Wednesday at $30.87, in a 52-week range of $26.96 to $61.68. The consensus price target is $33.84. Following the announcement, the stock was down about 7% at $28.65 in early trading indications Thursday.


I'm interested in the Newsletter