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What Could Benefit Kraft Heinz’s Earnings in 2Q16?

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2Q16 EPS

In this part, we’ll look at analysts’ EPS (earnings per share) estimates for Kraft Heinz (KHC) in 2016. Analysts expect Kraft Heinz’s adjusted EPS to be $0.72, compared to its 2Q15 EPS of $0.61. This represents a rise of 17%. In the last four quarters, the company has missed and beaten estimates twice each.

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Analysts’ expectations for 2016

Analysts’ expectations for KHC’s earnings look optimistic for the rest of 2016. The company’s earnings are expected to rise drastically by 70% and 44%, respectively, in 3Q16 and 4Q16. For 2016, KHC’s EPS is estimated to be $3.07, a rise of 40% compared to its EPS of $2.19 in 2015.

The company could benefit further from cost-savings strategies and favorable pricing. It expects to see stronger EPS in 2H16, driven by expected earnings accretion from refinancing its preferred stock in June 2016.

The Kraft-Heinz merger

Kraft Heinz was formed when Kraft Foods was acquired by the Pittsburgh-based and privately owned H.J. Heinz Holding in October 2014. The company changed its name to Kraft Heinz after the merger. It became the third-largest food and beverage company in North America. It’s the fifth-largest food and beverage company in the world.

3G Capital, a Brazilian private equity company, completed the merger deal along with Warren Buffett’s Berkshire Hathaway. Together, they invested $10 billion in the deal.

Earnings estimates for KHC’s peers

Kraft Heinz’s peers in the food and packaging industry include ConAgra Foods (CAG), Campbell Soup Company (CPB), and Flowers Foods (FLO).

  • Flowers Foods’ EPS for 2Q16 are expected to rise by 3%.
  • ConAgra Foods’ EPS for fiscal 1Q17 are projected to rise by 2%.
  • Campbell’s EPS for fiscal 4Q16 are expected to rise by 16%.

To gain exposure to Kraft Heinz, you can invest in ETFs such as the iShares S&P Global Consumer Staples ETF (KXI) and the iShares Morningstar Large Value ETF (JKF). They invest 1.4% and 1.0% of their portfolios, respectively, in Kraft Heinz.

In the next part, we’ll discuss what dividends the company has paid to date and its 2016 outlook.

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