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Kraft Heinz (KHC) Q1 Earnings Top, Revenues Miss Estimates


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The Kraft Heinz CompanyKHC posted first-quarter 2018 results, wherein earnings beat the Zacks Consensus Estimate while revenues missed the same. Higher input costs, lower sales in the United States along with higher investments to boost capabilities seemed to have adversely affected this food company's quarterly performance. However, lower taxes and higher pricing have benefited the results.

Shares of Kraft Heinz have gained 3.9% in the after-hour trading session on May 2, following the earnings release.

In the first quarter, the company re-aligned some of its international businesses. It formed a new reportable segment - Europe, Middle East, and Africa ("EMEA") by shifting Middle East and Africa businesses from the historical Asia Pacific, Middle East, and Africa ("AMEA") operating segment to the historical Europe reportable segment. Now, the remaining AMEA operations became the Asia Pacific ("APAC") operating segment.

Earnings

Adjusted earnings per share of 89 cents surpassed the consensus mark of 82 cents. Also, the bottom line increased 6% from the year-ago figure on lower effective tax rate.

Sales

Reported sales of $6.3 billion fell marginally short of the Zacks Consensus Estimate of $6.35 billion by 0.7%. The top line also declined 0.3% year over year owing to soft consumer demand in North America and Rest of World. The reported figure includes a favorable 1.2% impact from currency. Organically, sales decreased 1.5%.

Volume/mix declined 2.5% compared with a decrease of 1.6% in the fourth quarter. This was due to lower shipments across several categories in the United States as well as Rest of World. That said, Canada and EMEA registered solid retail growth in the quarter. Foodservice also gained in the United States and EMEA in the quarter.

Pricing was up 1%, same as the preceding quarter, driven by price improvement in Rest of World markets and the United States.

Operating Highlights

Gross profit of $2.2 billion increased 2.1% year over year.

Adjusted EBITDA was down 2.7% to $1.8 billion in the quarter due to higher input costs, lower volume/mix and more spending in strategic initiatives.

The Kraft Heinz Company Price, Consensus and EPS Surprise

The Kraft Heinz Company Price, Consensus and EPS Surprise | The Kraft Heinz Company Quote



Quarterly Segment Discussion

United States: Net sales of $4.4 billion declined 3.3% year over year. Organic sales also fell 3.3% on lower volumes. Volume/mix decreased 4.1% due to lower shipments of nuts, cold cuts and frozen potatoes, and in parts of the cheese business. Pricing was up 0.8%.

Canada: Net sales of $484 million grew 9.8% year over year owing to a 4.8% favorable impact from currency. Organically, sales were up 5% as well. Volume/mix was up 5% on higher cheese and coffee sales. Meanwhile, pricing remained flat compared with the prior-year quarter.

EMEA: Net sales of $658 million improved 14.7% year over year with a 12.4% favorable currency impact. Organically, sales were up 2.3%. Volume/mix inched up 2.8% on robust consumption gains in condiments, sauces, foodservice and owing to a strong soup season in the UK. However, pricing declined 0.5% due to more promotional activity in infant nutrition, primarily in Italy.

Rest of World (comprising Latin America and APAC): Net sales of $767 million decreased 0.2% from the prior-year quarter due to a 3.2% currency headwind. Organically, sales grew 3% on 4.3% higher pricing. Volume/mix decreased 1.3%.

Financials

Kraft Heinz ended the quarter with cash and cash investments of $1.8 billion, as of Mar 31, 2018, compared with $1.6 billion as of Dec 31, 2017.

Zacks Rank

Kraft Heinz carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Peer Releases

The Hershey Company's HSYfirst-quarter 2018 adjusted earnings came in line with analysts' expectation, while revenues beat the same. Growth in core chocolate brands and the acquisition of Amplify worked in favor of the company. However, cost pressures weighed on margins.

Mondelez International, Inc. MDLZ reported first-quarter 2018 results, with earnings and revenues both beating the consensus mark. The company posted impressive results on the back of strong performance in Asia, Middle East & Africa and Europe.

Upcoming Peer Release

Kellogg Company K is slated to report quarterly results on May 3, before the opening bell.

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Hershey Company (The) (HSY): Free Stock Analysis Report

Kellogg Company (K): Free Stock Analysis Report

Mondelez International, Inc. (MDLZ): Free Stock Analysis Report

The Kraft Heinz Company (KHC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: HSY , K , MDLZ , KHC



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