Please ensure Javascript is enabled for purposes of website accessibility

Why Kraft Heinz Co Stock Slumped Today

By Jeremy Bowman - Feb 16, 2018 at 12:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the packaged food giant slipped on a disappointing earnings report. Here's what you need to know:

What happened

Shares of Kraft Heinz Co (KHC 1.45%) were heading lower Friday after the foodmaker posted disappointing results in its fourth-quarter report and an underwhelming outlook for 2018. Like other legacy food companies, Kraft Heinz is struggling with the consumer shift to healthier and fresher foods. As of 11:34 a.m. EST, the stock was down 4.2%.

A package of Kraft american cheese singles

Image source: Kraft.

So what 

Overall revenue in the quarter ticked up 0.3% to $6.88 billion, but adjusting for currency exchange, organic sales were down 0.6%. That compared to analyst expectations of $6.91 billion. Sales in the U.S., its biggest market, fell 1.1% to $4.79 billion, due to a 1.7% decline in volume. Gross margin was down 90 basis points to 35%, and adjusted earnings per share fell a penny to $0.90, below estimates at $0.95. 

CEO Bernardo Hees acknowledged that the company's 2017 financial performance "did not reflect our progress or potential," but also said the company was accelerating key initiatives, including $300 million for strategic investments in brands and employees, and $800 million in capital expenditures.

Now what

Management saw challenges ahead in the near term as increased competition and a shortfall in the potato supply for its Ore-Ida brand is expected to weigh on growth for the current quarter, though management did not give specific guidance. 

Like other traditional food giants including General MillsKellogg, and Campbell Soup, Kraft Heinz has seen organic growth stagnate as consumer tastes change, and the industry is being forced to look to acquisitions and cost-cutting in order to grow profits. While the company's stable of brands including Philadelphia cream cheese and Velveeta is delivering steady growth in emerging markets, Kraft Heinz looks like it will continue to struggle in developed markets for the foreseeable future.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Kraft Heinz Intermediate Corporation II Stock Quote
Kraft Heinz Intermediate Corporation II
$38.40 (1.45%) $0.55

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.