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Why Analysts Have Low Expectations for Kraft Heinz’s 1Q18

Amit Singh - Author
By

Aug. 18 2020, Updated 4:40 a.m. ET

Kraft Heinz stock could be pressured

Kraft Heinz (KHC) is set to announce its 1Q18 results on May 2. Analysts expect the company’s sales and earnings to fall YoY (year-over-year). Its organic sales are projected to fall, reflecting US and Canadian volume decline due to distribution and market share losses and soft demand. A tough retail environment is also posing a challenge.

Kraft Heinz’s bottom line is also projected to fall YoY, dragged down by increased cost pressure and lower volumes. Moreover, analysts expect benefits from cost-saving initiatives to diminish as the year progresses. Given the near-term challenges, multiple analysts have lowered their target prices for Kraft Heinz stock, and low expectations for its 1Q18 earnings are likely to pressure its stock further.

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Stock price movement

The graph above shows how packaged food manufacturer stocks have unperformed broader markets and are trading negatively. Sales and margin headwinds are taking a toll on their performance. Kraft Heinz, underperforming most of its peers, had fallen ~26.9% year-to-date as of April 25. Meanwhile, General Mills (GIS), Hershey (HSY), Kellogg (K), Conagra Brands (CAG), and J.M. Smucker (SJM) had fallen 25.7%, 17.6%, 10.3%, 1.4%, and 7.0%, respectively, and the S&P 500 (SPY) had fallen 1.3%.

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