Weak quarter, near-term challenges
The Kraft Heinz Company (KHC) reported weaker-than-expected 4Q17 results, following which its stock fell 2.6% before closing at $70.80, on February 16, 2018. The company missed analysts’ expectations both on the top and bottom line fronts. Its net sales increased marginally. However, its organic sales marked a YoY (year-over-year) decline as lower volumes more than offset pricing improvements.
Inflation in commodity prices, increased freight costs, and a YoY rise in the adjusted tax rate dented the company’s bottom line.
Going forward, persisting challenges in the United States and retailers’ lowering their inventories in Canada are expected to hurt the company’s sales growth rate. Meanwhile, inflation in commodity prices, increased freight costs, and higher interest expenses are expected to take a toll on its EPS (earnings per share). Business reinvestment needs in support of growth could further lower Kraft Heinz’s margins in the near term.
Kraft Heinz stock trading in the red
Kraft Heinz stock was trading in the red on a YTD (year-to-date) basis as of February 16, 2018. KHC stock has fallen ~9.0% since the beginning of the year and underperformed the S&P 500 Index (SPX), which has risen 2.2% during the same period.
Meanwhile, major food stocks General Mills (GIS), the Campbell Soup Company (CPB), Conagra Brands (CAG), and the Hershey Company (HSY) have also marked YTD falls. On the contrary, the Kellogg Company (K) stock has risen 3.5% YTD, while the J. M. Smucker Company (SJM) stock has remained almost flat.