Shares of Kraft Heinz (KHC -0.55%) rose as much as 5% early Wednesday, then settled to close up 2.4% after the global food company announced strong quarterly results and raised its full-year profit outlook. On the former, Kraft Heinz's third-quarter net sales grew 1% year over year to $6.57 billion, translating to a 14.3% increase in adjusted (non-GAAP) earnings per share to $0.72. Analysts, on average, were anticipating earnings of $0.62 per share on lower revenue of $6.34 billion.
On Kraft Heinz's broad-based growth, balance sheet progress
Digging deeper into Kraft Heinz's results, the company achieved organic net sales growth of 1.7%, including net sales growth across each of its three core pillars in foodservice, emerging markets, and strategic U.S. retail "grow platforms" -- the last of which includes "Taste Elevation" (sauces and condiments) and "Easy Meals Made Better" categories (products like macaroni and cheese, pizza, and frozen snacks).
Keeping with its latest transformation plan, unveiled earlier this year, Kraft Heinz also achieved a key milestone in reaching its target net leverage ratio of roughly 3 times. "A stronger balance sheet, along with advancements we have made across the business, gives us further conviction behind our strategy," added Kraft Heinz Chair and CEO Miguel Patricio.
What's next for Kraft Heinz stock?
Looking ahead to the rest of the year, Kraft Heinz narrowed its outlook for 2023 organic net sales growth to be closer to the lower end of its previous 4% to 6% range. At the same time, the company raised its outlook for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) growth of 5% to 7% (up from 4% to 6% previously) and for adjusted earnings per share of $2.91 to $2.99 (increased from prior guidance for adjusted earnings per share of $2.83 to $2.91).
All told, there were no big surprises in this modestly better-than-expected report. Coupled with Kraft Heinz's improving balance sheet and bolstered earnings outlook, I think the market is right to forgive the slight incremental reduction to its top-line guidance.
