What happened
Shares of Kraft Heinz Co (NASDAQ: KHC) were heading lower Friday after the foodmaker posted disappointing results in its fourth-quarter report and an underwhelming outlook for 2018. Like other legacy food companies, Kraft Heinz is struggling with the consumer shift to healthier and fresher foods. As of 11:34 a.m. EST, the stock was down 4.2%.
Image source: Kraft.
So what
Overall revenue in the quarter ticked up 0.3% to $6.88 billion, but adjusting for currency exchange, organic sales were down 0.6%. That compared to analyst expectations of $6.91 billion. Sales in the U.S., its biggest market, fell 1.1% to $4.79 billion, due to a 1.7% decline in volume. Gross margin was down 90 basis points to 35%, and adjusted earnings per share fell a penny to $0.90, below estimates at $0.95.
CEO Bernardo Hees acknowledged that the company's 2017 financial performance "did not reflect our progress or potential," but also said the company was accelerating key initiatives, including $300 million for strategic investments in brands and employees, and $800 million in capital expenditures.
Now what
Management saw challenges ahead in the near term as increased competition and a shortfall in the potato supply for its Ore-Ida brand is expected to weigh on growth for the current quarter, though management did not give specific guidance.
Like other traditional food giants including General Mills , Kellogg , and Campbell Soup , Kraft Heinz has seen organic growth stagnate as consumer tastes change, and the industry is being forced to look to acquisitions and cost-cutting in order to grow profits. While the company's stable of brands including Philadelphia cream cheese and Velveeta is delivering steady growth in emerging markets, Kraft Heinz looks like it will continue to struggle in developed markets for the foreseeable future.
10 stocks we like better than The Kraft Heinz Company
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and The Kraft Heinz Company wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of February 5, 2018
Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
