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MarketScreener Homepage  >  Equities  >  Nasdaq  >  The Kraft Heinz Company    KHC

THE KRAFT HEINZ COMPANY

(KHC)
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Kraft Heinz takes $3 billion writedown, signals weaker second-half earnings growth

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07/30/2020 | 02:11pm EDT
FILE PHOTO: Heinz tomato ketchup is show on display during a preview of a new Walmart Super Center prior to its opening in Compton, California

Kraft Heinz Co on Thursday said second-half core earnings growth would be weaker-than-expected and took a nearly $3 billion charge on the value of several businesses, highlighting uncertainty in the food industry due to the novel coronavirus.

Shares of the Chicago-based company, which makes Philadelphia cream cheese and Kraft Singles, were down 4% in afternoon trading.

Higher employee bonuses, foreign exchange fluctuations and climbing commodity costs - particularly the price of cheese - are expected to soften second-half results, Kraft Heinz said.

Adjusted EBITDA growth - earnings before interest, taxes, depreciation, and amortization - will now be about 9 percentage points lower than last year, versus the 7-percentage-point hit the company predicted in April.

With movement outdoors restricted due to lockdowns to curb the spread of the coronavirus, people around the world bought significantly more groceries during the period for meals at home.

While Kraft Heinz's retail sales rose, the lockdown took its toll on its U.S. and Canadian food service businesses, which provide ketchup, mayonnaise and other products to restaurants, offices and school cafeterias. These units were included in a nearly $1.8 billion writedown taken during the quarter.

Kraft Heinz - which has written down about $20 billion of its brands and businesses since February 2019 - also took nearly $1.1 billion off the value of Oscar Mayer, Maxwell House and seven other brands.

Due to the most recent impairment charges, the company reported a second-quarter loss attributable to common shareholders of $1.65 billion, versus a profit of $449 million a year earlier. Excluding items, adjusted earnings were 80 cents per share, handily beating analysts' average estimate of 65 cents.

Food companies have particularly benefited from sales in developed countries, which have strong e-commerce infrastructure and adaptable distribution systems.

Revenue from Kraft Heinz's U.S. business rose 8.5% to $4.9 billion in the quarter ended June 27, as it ramped up inventory and boosted sales across nearly all its retail categories. Overall sales grew 3.8% to $6.65 billion, beating analyst expectations for $6.54 billion, according to Refinitiv.

Bernstein analysts called this a "solid quarter" for Kraft Heinz, but said they would remain "on the sidelines" until September, when the company is due to announce a strategic update at its investor day.

Shares are up 10.7% on the year, outperforming the benchmark S&P 500 stock index's gain of about 0.9% on the year.

(Editing by Bernadette Baum)

By Richa Naidu

Stocks mentioned in the article
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CHEESE FUTURES (CSC) - CMG (ELECTRONIC)/C1 0.00% 2.588 End-of-day quote.26.43%
DJ INDUSTRIAL 0.70% 26618.55 Delayed Quote.-7.39%
NASDAQ 100 1.29% 11032.01652 Delayed Quote.24.88%
NASDAQ COMP. 1.23% 10867.012232 Delayed Quote.19.76%
S&P 500 0.71% 3292.52 Delayed Quote.1.25%
THE KRAFT HEINZ COMPANY 1.75% 34.97 Delayed Quote.7.00%
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Financials (USD)
Sales 2020 25 593 M - -
Net income 2020 182 M - -
Net Debt 2020 25 926 M - -
P/E ratio 2020 32,1x
Yield 2020 4,65%
Capitalization 42 032 M 42 032 M -
EV / Sales 2020 2,66x
EV / Sales 2021 2,67x
Nbr of Employees 37 000
Free-Float 25,9%
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Technical analysis trends THE KRAFT HEINZ COMPANY
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TrendsBullishBullishBullish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 21
Average target price 36,53 $
Last Close Price 34,38 $
Spread / Highest target 39,6%
Spread / Average Target 6,24%
Spread / Lowest Target -12,7%
EPS Revisions
Managers
NameTitle
Miguel Patricio Chief Executive Officer
Alexandre Behring da Costa Chairman
Flavio Torres Head-Global Operations
Paulo Basilio Global Chief Financial Officer
Gregory Edward Abel Independent Director
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