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What to Expect From Kraft Heinz in Fiscal 2018

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Challenges in the near-term

Kraft Heinz’s (KHC) 2017 sales disappointed investors as low demand for packaged foods in the US (SPY), distribution loss in the meats and cheese category, adverse currency rates, and lower pricing dented its top-line growth.

Though the company reported improved bottom line performance in 1H17, its 2H17 results could suffer due to increased commodity costs. The company’s margins could be pressured from the higher promotional environment, weak volumes, lower pricing, and increased promotional activity to spur sales growth.

What analysts project

Analysts project Kraft Heinz’s (KHC) top line to remain muted in 2017 as industry-wide challenges persist. Plus, a tough retail environment is expected to subdue its growth.

For 2018, analysts project a 2.1% increase in the company’s sales, driven by innovation-led consumption growth and favorable currency rates.

With respect to its bottom line, analysts expect Kraft Heinz’s adjusted EPS to rise 8.0% in 2017. The company’s bottom line is projected to grow 7.5% in 2018.

Kraft Heinz’s focus on cost savings initiatives, an anticipated decrease in overhead costs, and favorable product mix are expected to more than offset the negatives stemming from weak volumes, lower pricing, and rising commodity costs.

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