H.J. Heinz Company
(
HNZ
) is scheduled to report its third-quarter 2012 financial results
on February 17, 2012. The current Zacks Consensus Estimate for the
quarter is 85 cents per share.
Second-Quarter 2012 Synopsis
Heinz posted better-than-expected second-quarter 2012 adjusted
earnings of 81 cents per share, exceeding the Zacks Consensus
Estimate by a penny. The earnings also surpassed the prior-year
earnings of 78 cents by 3.8%.
About 3 cents of the increase in earnings were driven by
enhanced sales, lower taxes and favorable foreign exchange rates.
Robust sales growth was fueled by developing markets that were
backed by acquisitions and strong global performance of Ketchup.
Heinz's Top 15 brands also grew organically in the quarter,
contributing to the growth.
During the quarter, total sales climbed up 8.3% to $2.83 billion
in the second quarter, led by a 15.8% organic sales growth in
emerging markets. Further, acquisitions of the Quero brand in
Brazil and the Foodstar operations in China fuelled sales growth by
5.0%. However, total sales lagged the Zacks Consensus Estimate of
$2.93 billion.
Heinz also affirmed its full-year 2012 earnings expectation to
grow in the range of 6% - 8% within $3.24 to $3.32, excluding the
impact of productivity initiatives but including the incremental
investment in Keystone. Heinz also expected its sales to grow in
the range of 7%-8% for 2012.
Agreement with Analysts
Analysts have projected weak growth from the company over the
next two years, though Heinz had posted better-than-expected
second-quarter results, as we don't see any significant positive
movement in analyst estimates for the current quarter or both the
fiscal years over the past 30 days. With a downside trend in the
estimates, we justify a negative sentiment on the stock.
One out of the ten analysts increased his estimates for the
third-quarter of 2012, whereas two of them reduced their estimates
over the past 30 days.
For the fiscal year 2012, five out of the thirteen analysts
predicted a downside in the estimates, while four out of the
fifteen lowered their estimates for the fiscal year 2013. However,
none of the analysts moved up their estimates for both the fiscal
years.
The downside trend points to the fact that there was no major
catalyst during the quarter that could drive results.
Magnitude of Estimate Revisions
The estimates for the upcoming quarter moved down by a penny to
85 cents per share in the past 30 days. Likewise, the estimates for
both the fiscal 2012 and 2013 declined by one cent each and came
down to $3.32 and $3.60 per share, respectively.
Earnings Surprise
With respect to earnings surprises, Heinz has topped the Zacks
Consensus Estimate in three of the last four quarters, while it
declined in one of the quarters. Over the last four quarters, the
earnings surprise ranged from a negative 1.39% to a positive of
3.70%, with the average earnings surprise being 1.55%, suggesting
that Heinz has outperformed the Zacks Consensus Estimate.
H.J. Heinz, which competes with
Sara Lee Corp.
(
SLE
) and
Campbell Soup Company
(
CPB
), primarily markets ketchup, condiments & sauces, frozen food,
soup, beans, meals & snacks, and infant foods. Heinz's major
brands are Heinz Ketchup, Ore-Ida frozen potatoes, Weight Watchers
Smart Ones frozen dinners, Classico sauces, Jack Daniels barbeque
sauces and ABC Indonesian sauces.
Heinz has a solid balance sheet and strong free cash flow, which
the company uses to pay off its shareholders through regular
dividend payments.
However, intense competition from other established players and
commodity inflation undermine the company's future growth prospects
and profitability. Consequently, we have a Neutral rating on the
stock. Heinz holds a Zacks #4 Rank, which translates into a
short-term Sell recommendation.
CAMPBELL SOUP (
CPB
): Free Stock Analysis Report
HEINZ (HJ) CO (
HNZ
): Free Stock Analysis Report
SARA LEE (
SLE
): Free Stock Analysis Report
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