Kraft Heinz snaps long streak of profit beats and sales fell shy again

By Tomi Kilgore

Prices increase at lowest rate in 2 1/2 years, and volume decreased at lowest rate in about 2 years

Shares of Kraft Heinz Co. fell in premarket trading Wednesday, after the food and beverage brands company only matched first-quarter profit expectations and fell shy on sales, again.

Sales declined, as prices increased at the lowest rate since the third quarter of 2021, while volume and mix declined at the lowest rate since the second quarter of 2022.

The stock (KHC) slumped 4.2% in premarket trading, which puts it on track for the biggest one-day selloff since it fell 5.5% on Feb. 14, after fourth-quarter results were reported.

The company, the owner of brands including Heinz ketchup, Kraft Mac & Cheese, Capri Sun and Lunchables, said net income fell to $801 million, or 66 cents a share, from $836 million, or 68 cents a share, in the same period a year ago.

Excluding nonrecurring items, adjusted earnings per share of 69 cents matched the FactSet consensus. That marked the first time the company didn't beat the FactSet EPS consensus in at least five years, based on available FactSet data.

Sales slipped 1.2% to $6.411 billion, just below the FactSet consensus of $6.429 billion. That was the fourth straight quarter the company came up short on sales, according to FactSet data.

Volume and mix fell 3.2 percentage points, as declines in North America and international developed markets, due primarily to pushback from higher prices, offset an increase in emerging markets. The volume decline was at the lowest rate since it fell 2.3 percentage points in the second quarter of 2022, and marked a sharp improvement from the recent peak of 7.0 percentage points in the second quarter of 2023.

Meanwhile, prices increased 2.7 percentage points, including increases in all geographic regions, as the company looked to offset higher input costs. But the increase was at the lowest rate since prices rose 1.5 percentage points in the third quarter of 2021, and was down sharply since the recent peak of a 15.4 percentage-point jump in the third quarter of 2022.

Cost of products sold fell more than sales, down 4.8% to $4.17 billion, to push up gross margin to 35% from 32.6%.

For 2024, the company maintained its adjusted EPS guidance range of $3.01 to $3.07.

The stock has gained 4.4% year to date through Tuesday, while the S&P 500 tacked on 5.6%.

-Tomi Kilgore

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05-01-24 0854ET

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