The Kraft Heinz Company (KHC), one of the biggest names in food and beverages, just released its second-quarter 2024 financial results, showing a mix of good and not-so-good news.
KHC’s Key Numbers at a Glance
Net sales took a 3.6% dip, landing at $6.5 billion, influenced by currency shifts and some sell-offs. Organic Net Sales, excluding those factors, dropped by 2.4%. CEO Carlos Abrams-Rivera blamed cautious consumer sentiment, saying, “Our second quarter net sales growth came in lower than originally anticipated, as consumer sentiment remains cautious.”
Kraft Heinz’s Profit Margins Look Good
Despite the sales drop, Kraft Heinz’s gross profit margin climbed from 33.6% to 35.4%, with the adjusted margin also reaching 35.5%. This boost came from lower costs for commodities and logistics, plus some strategic price hikes to cover rising input costs.
KHC’s Operating Income and EPS
Operating income plummeted by 62.1% to $0.5 billion, mainly because of $854 million in non-cash impairment losses. But there’s a silver lining: adjusted operating income rose by 2.0% to $1.4 billion thanks to cost savings and higher prices. Diluted EPS fell dramatically by 90.1% to $0.08 due to those losses, while adjusted EPS saw a small drop of 1.3% to $0.78, mostly because last year’s one-time tax benefit wasn’t there this time. This still beat the consensus EPS estimate of $0.73 per share.
KHC’s Cash Flow and Capital Return
Year-to-date net cash from operations rose by 8.1% to $1.7 billion, driven by better working capital management and higher adjusted operating income. Free cash flow also jumped by 8.7% to $1.2 billion. Kraft Heinz returned $1.5 billion to stockholders, with $969 million paid in dividends and $537 million spent on share buybacks.
KHC’s Forward Outlook
For the rest of 2024, Kraft Heinz expects Organic Net Sales to be down 2% to flat and adjusted operating income to grow by 1% to 3%. The company sticks to its adjusted EPS growth forecast of 1% to 3%, ranging from $3.01 to $3.07.
KHC’s CEO’s Comments
Abrams-Rivera is looking ahead with optimism, focusing on innovation and marketing, especially in North America. “We are anticipating a continued ramp-up of both innovation and renovation, particularly in North America Retail, and we are increasing our marketing investment to continue to drive brand superiority across our portfolio,” he said.
Kraft Heinz is also set to boost distribution in Away From Home and Emerging Markets, targeting value-conscious consumers by selectively upping promotional investments. “We remain confident in our strategy and in the attractive categories in which we compete,” Abrams-Rivera concluded.
Is KHC a Good Buy?
Analysts remain cautiously optimistic about KHC stock, with a Moderate Buy consensus rating based on seven Buys, seven Holds, and one Sell. Over the past year, KHC has declined by 2%, and the average KHC price target of $37.38 implies an upside potential of 10.46% from current levels. These analyst ratings are likely to change following KHC’s results today.
