Will Kraft Heinz’s Earnings Beat Consensus Estimates?



Reported EPS in previous quarters

Kraft Heinz (KHC) in 2Q15 reported diluted EPS (earnings per share) of $0.92 compared to $0.80 for the same quarter last year due to higher spending on cost savings initiatives and costs related to the merger with Heinz. These costs were partly offset by gains on an asset sale. The adjusted EPS was reported as $0.98 in the 2Q15. It beat the analyst estimates by 17%.

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Estimated EPS

The EPS consensus estimate for the third quarter is $0.58. We’ll have to wait and find out if Kraft Heinz will beat the estimates this quarter too, and by how much. The analysts that follow this company are expecting it to grow earnings at an average annual rate of 10% over the next five years. This year, analysts are forecasting an earnings fall of -13.1% over last year. Analysts expect earnings growth of 12.6% next year over 2015’s forecast earnings.

What management had to say

Kraft Heinz CEO Bernardo Hees stated, “The company remains confident in its ability to deliver against its initial financial expectations for the merger of Kraft and Heinz, including its expectation to generate aggressive run-rate cost savings of $1.5 billion by the end of 2017, inclusive of savings from productivity and cost savings initiatives contemplated before the merger. As a matter of practice, however, Kraft Heinz does not expect to issue or update earnings guidance going forward.”

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Kraft Heinz’s rivals in the industry include Hormel Foods (HRL), Flowers Foods (FLO), and Cal-Maine Foods (CALM). They reported an EPS of $0.56, $0.25, and $2.95, respectively, in their last reported quarters. The PowerShares DWA Consumer Staples Momentum Portfolio (PSL) invests 1.4% of its portfolio in the FLO stock.

Analyst estimates for Kraft Heinz

Kraft Heinz will be reporting third quarter results as a combined entity since the merger. Kraft has reported weak sales for the past few quarters due to volume losses. The rise in prices and softness in certain categories resulting from the lack of innovation or brand building activities could have resulted in the volume losses. Revenue for both Kraft and Heinz has been suffering due to deteriorating consumer demand for packaged food products.

However, profits were sound in the last quarter, supported by lower commodity costs, mainly dairy and meat, lesser SG&A[1. Selling, general, and administrative expenses] due to advertising efficiency, and reduced manufacturing costs driven by improved productivity. Analysts expect the trend to continue in the upcoming quarter too. The average analyst estimates for revenue come to $4.4 billion, and to $0.58 for earnings per share.


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