Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Kraft Heinz lifts profit outlook on price hikes, easing costs

Published 05/03/2023, 07:16 AM
Updated 05/03/2023, 11:06 AM
© Reuters. FILE PHOTO: A Heinz Ketchup bottle sits between a box of Kraft macaroni and cheese and a bottle of Kraft Original Barbecue Sauce on a grocery store shelf in New York March 25, 2015.  REUTERS/Brendan McDermid/File Photo

© Reuters. FILE PHOTO: A Heinz Ketchup bottle sits between a box of Kraft macaroni and cheese and a bottle of Kraft Original Barbecue Sauce on a grocery store shelf in New York March 25, 2015. REUTERS/Brendan McDermid/File Photo

By Aatrayee Chatterjee

(Reuters) -Kraft Heinz Co raised its full-year profit forecast on Wednesday on the back of higher prices and sustained demand for its packaged food items as raw material costs, which have plagued the industry, also ease.

Shares of the Philadelphia Cream Cheese maker were up 3.9% in early trading after it also reported better-than-expected quarterly results.

The packaged food maker, like other U.S. peers such as Kellogg (NYSE:K), Coca-Cola (NYSE:KO) Co and General Mills (NYSE:GIS), has been steadily increasing product prices to protect profits from high costs of some raw materials like vegetable oils, wheat and dairy.

However, Chief Financial Officer Andre Maciel said commodity costs were coming down slightly faster than expected, with gross margin in the first quarter improving by about 130 basis points.

The company has in recent months also said it would abandon further price hikes for its quick-fix meals and condiments as consumers turn more price sensitive, though it still expects 2023 growth to be driven by price.

Even with inflation squeezing household budgets, consumers have mostly refrained from trading down to cheaper alternatives and are still willing to pay more for their favorite snack brands despite multiple rounds of price hikes.

The Lunchables maker expects adjusted earnings between $2.83 and $2.91 per share for 2023, above the prior target of $2.67 to $2.75 per share.

JP Morgan analyst Ken Goldman said the increase in profit guidance so early in the year was a surprise especially because inflation is still expected to be in the high single-digit range.

The strong outlook echoes comments from peers PepsiCo (NASDAQ:PEP) Inc and Mondelez (NASDAQ:MDLZ), who have also lifted annual forecasts supported by price increases.

© Reuters. FILE PHOTO: A Heinz Ketchup bottle sits between a box of Kraft macaroni and cheese and a bottle of Kraft Original Barbecue Sauce on a grocery store shelf in New York March 25, 2015.  REUTERS/Brendan McDermid/File Photo

Excluding one-off items, Kraft Heinz (NASDAQ:KHC) earned 68 cents per share, topping analysts' estimate of 60 cents per share, according to Refinitiv IBES data.

Net sales rose by a better-than-expected 7.3% to $6.49 billion in the first quarter.

Latest comments

They jumped on the inflation wagon ride with no justification
Most of this crap isn't good for you.
Wheat is the lowest it's been in over 2 years.  It and other commodities like grain have been in a downtrend for a year. It's pure and simple gouging the consumer with price increases to show higher profits and higher executive compensation
Yes, this is despite the Ukraine supply being impacted.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.