Are things really improving for packaged-foods producer H.J. Heinz
For fiscal 2010's third quarter, revenue of $2.68 billion was up big time -- nearly 13% year over year. That blows away recent quarterly results posted by such competitors as Kraft
But lift the bun off those results, and Heinz's heaping helping shrinks to a more normal-sized portion. For one, revenue in the year-ago period was down 7.5%, setting up an awfully easy comparison. Moreover, favorable currency movements made an ample contribution to reported revenue.
By contrast, organic sales -- a metric that strips out the effects of forex and acquisitions/divestitures -- rose 3%. That's much more in line with the similarly adjusted sales figures that I've seen from other major players.
Regular readers know that I'm a big fan of volume as a measure of retailer and consumer traction. But here we once again run into a problem of appearance versus reality. While total volume did increase slightly more than 1%, it would've been difficult not to turn in a positive showing, given that this key data point sunk 6% in last year's comparative quarter.
Now, management was keen to notify conference-call listeners that volume would've been up nearly 3% if not for its food-service business. Externally, segment results were pressured by anemic restaurant traffic; internally, Heinz has been earnestly reducing product variety in order to boost profitability.
Look, we all know that quick-serve restaurants including McDonald's
If you're starting to get a bad taste in your mouth, just wait for this final forkful. As a savvy analyst duly noted, Heinz didn't even mention market-share trends. Different companies provide various levels of detail in this regard, but to be completely mum on the subject -- even when confronted on a conference call -- is frankly suspicious.
Ultimately, the quarter did have its genuine positives. Driven by pricing, currency, volume, and productivity advances, earnings per share increased more than 9%, to $0.83. Organic sales in emerging markets jumped 15%. Meanwhile, operating free cash flow soared 88% to $439 million.
But given management's less-than-straightforward approach to sharing company results, combined with easy year-over-year comparisons, it's hard to know whether the company is enjoying anything more than a one- or two-quarter bounce.
Unless shares pull back dramatically, put Heinz on your hot dog, but let others dress their portfolios with the stock.
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