Kraft Heinz (NASDAQ:KHC) Co. has reported a significant year-over-year increase in its third-quarter earnings for 2023, exceeding estimates with earnings of 72 cents per share. This surge was primarily driven by an increased EBITDA and an adjusted gross profit of $2,231 million.
Despite net sales falling short of the estimated $6,700 million, landing at $6,570 million due to currency impacts and divestitures, they still rose by 1% YoY. Organic net sales saw a 1.7% YoY increase, with pricing rising 7.1 percentage points YoY.
In North America, net sales saw a slight decline of 0.4% to $4,995 million due to a decrease in organic sales by 0.1%. However, international net sales rose by 5.7% to $1,575 million with an increase in organic sales by 8%.
The company ended the quarter with cash and cash equivalents of $1,052 million, long-term debt of $19,270 million, total shareholders' equity of $49,434 million, and free cash flow of $1,841 million year-to-date.
Kraft Heinz has declared a quarterly dividend of 40 cents per share payable on December 29, 2023. The company has also raised its adjusted EPS and adjusted EBITDA guidance for the year while focusing on enhancing productivity and investing in marketing, technology, and research and development.
For 2023, management expects organic net sales growth at the lower end of its previously guided range of 4-6%. Adjusted EBITDA is expected to increase between 5-7% at constant currency compared with the earlier projection of a growth between 4-6%. The adjusted EPS for 2023 is now expected to be in the range of $2.91-$2.99, higher than the previous forecast of $2.83-$2.91. The adjusted gross profit margin is likely to increase 200-250 basis points in 2023 compared with the expansion of 150-200 basis points expected earlier.
Despite these promising figures, the company's shares are ticking higher after reporting Q3 EPS of $0.72, beating expectations by $0.06, even though revenue of $6.57 billion fell short by $130 million. Growth was recorded in Foodservice, Emerging Markets, and U.S Retail sectors with organic sales rising by 1.7%, driven by a 7.1% price increase that compensated for a 5.4% volume/mix decline.
Kraft Heinz's stock holds a Moderate Buy rating with a $37.53 target price, indicating a 19.3% upside following an 18% year-to-date decline.
InvestingPro Insights
InvestingPro's real-time data provides valuable insights into Kraft Heinz Co.'s financial performance. The company's market capitalization stands at $39.55 billion, and it trades at a P/E ratio of 12.67, suggesting a relatively low valuation compared to its near-term earnings growth. The company's revenue for the last twelve months as of Q2 2023 is $27.1 billion, marking a growth of 5.71%, which aligns with one of the InvestingPro Tips indicating accelerating revenue growth.
Another notable point from InvestingPro Tips is Kraft Heinz's significant shareholder yield, which is supported by a generous dividend yield of 5.09%. Despite some analysts revising their earnings downwards for the upcoming period, the company's profitability over the last twelve months, coupled with predictions of continued profitability this year, paint a promising picture for potential investors.
InvestingPro offers numerous additional insights and tips for Kraft Heinz and other companies. It's a valuable tool for investors seeking to make informed decisions based on real-time data and expert analysis.
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