Kraft Heinz (KHC) Q4 Earnings And Revenues Miss Estimates

The Kraft Heinz Company (NYSE:K) posted fourth-quarter 2017 results, wherein earnings and revenues missed the Zacks Consensus Estimate.

Earnings

Adjusted earnings per share of 90 cents missed the Zacks Consensus Estimate of 96 cents. Also, the bottom-line declined 1.1% from the year-ago figure on higher effective tax rate.

Sales

Reported sales of $6.88 billion fell marginally short of the Zacks Consensus Estimate of $6.90 billion by 0.3%. However, the top line inched up only 0.3% year over year owing to soft consumer demand in North America and Canada. The reported figure includes a favorable 0.9% impact from currency. Organically sales decreased 0.6%.

Volume/mix declined 1.6% compared with a decrease of 0.2% in the previous quarter. This was due to lower shipments across several categories in the United States as well as cheese and coffee in Canada.

Pricing was up 1% compared with an increase of 0.5% in the preceding quarter driven by price improvement in Rest of World markets and the United States.

Operating Highlights

Gross profit of $2.4 billion decreased 4% year over year.

Adjusted EBITDA was up 4% to $2 billion in the fourth quarter owing to cost initiatives, lower overhead costs and favorable pricing, partially offset by higher input costs and lower volume/mix.

Quarterly Segment Discussion

Kraft Heinz reports through four segments – the United States, Canada, Europe and Rest of World.

United States: Net sales of $4.8 billion declined 1.1% year over year. Organic sales also fell 1.1% on lower volumes. Volume/mix decreased 1.7% due to some distribution losses on Planters in the club channel, lower shipments in natural cheese and service-related losses in cold cuts. However, this was partially offset by higher demand in Lunchables, P3, Capri Sun ready-to-drink beverages, macaroni and cheese category. Pricing was up 0.6% owing to higher prices in cheese and seasonal items.

Canada: Net sales of $591 million declined 4.1% year over year with a 4.5% favorable impact from currency. Organically, sales declined 8.6% as well. Volume/mix was down 8.6% on lower inventory levels at retail, the discontinuation of select cheese products and lower shipments of coffee. Meanwhile, pricing remained flat compared with the prior-year quarter.

Europe: Net sales of $656 million improved 9.3% year over year with a 8.4% favorable currency impact. Organically, sales were up 0.9%. Volume/mix inched up 1.8% on robust consumption gains in condiments and sauces in Germany, Spain and France. However, pricing declined 0.9% due to changes in promotional spending in Italy, the UK and Russia.

Rest of World: Net sales of $843 million increased 5.2% year over year despite a 1.8% currency headwind. Organically, sales grew 7% on 5.7% higher pricing. Volume/mix increased 1.3% too.

Financials

Kraft Heinz’s ended the quarter with cash and cash investments of $1.6 billion, as of Dec 31, 2017 compared with $4.2 billion as of Dec 31, 2016.

The Kraft Heinz Company Price, Consensus and EPS Surprise

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 (NYSE:HSY) earnings and revenues missed the Zacks Consensus Estimate in fourth-quarter 2017 and also declined from the year-ago level.

Kellogg Company’s (NYSE:K) fourth-quarter 2017 adjusted earnings came in line with the Zacks Consensus Estimate while revenues surpassed the same.

Upcoming Peer Release

B&G Foods (NYSE:BGS) is expected to report quarterly results on Feb 22.

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