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 financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
