A year-over-year increase in both sales and profits is expected from Kraft Heinz Co (NASDAQ:KHC) when the food and beverage company reports its third quarter earnings on Wednesday, November 1.
The company – whose brands include Classico, Golden Circle, Jello, Lunchables, Philadelphia, Kool-Aid, Kraft, and Heinz – is expected to report a 3% increase in revenue over the year-ago quarter.
Wall Street analysts peg revenue of $6.71 billion, according to Zacks Investment Research.
Earnings per share (EPS) are expected to rise by almost 5% from $0.63 to $0.66.
Analysts at the Bank of America (BoA) expect slightly better EPS from the company of $0.68.
They forecast Kraft Heinz’s organic sales to rise 5.7% driven by an 8.2% rise in price and a 2.5% decline in volume.
In North America, they expect 2% organic sales growth driven by a 7.5% increase in price and a 5.5% decline in volume. In International, they forecast net sales like the first quarter’s 18.1%, 18% driven by a 10.5% increase in price and a 7.5% increase in volume.
The BoA analysts forecast margins at 33%, noting the company’s expectation that its 3Q margins will be below both 2Q and 4Q.
They said they would be looking to see if there are tailwinds in the quarter driven by fall merchandizing efforts, specifically Lunchables, and supply chain recovery.
“Service levels have improved which ideally would give KHC more flexibility to restart promotional activity and merchandizing efforts, which should ease impacts from the current consumer outlook (pressured wallets, widening price gaps),” the analysts wrote.
“In addition, supply chain issues in meats, cream cheese, drinks and potatoes which have since abated should support market share for the balance of the year.”
The analysts expect Kraft Heinz to provide initial insights on fiscal 2024, specifically around when it expects its volumes to be positive at some point during the new financial year.
They retained their ‘Buy’ rating but lowered their price target on the stock from US$48 to US$40.
Shares of Kraft Heinz traded at about US$31 on Friday afternoon.
“Our lowered multiple reflects the multiple compression we’ve seen across the packaged food space in recent weeks,” the analysts said.
“KHC continues to be positioned well in an environment where at-home consumption remains elevated given that food away from home consumption remains expensive on a relative basis, which is supported by KHC’s improvement in share trends and service levels.”
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