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Mark Yu
Mark Yu
Articles (430)  | Author's Website |

Kraft Heinz Delivers Profitability Despite Declining Revenue

Earnings beat brought life to ketchup maker

November 06, 2019 | About:

Famous ketchup and mustard maker Kraft Heinz (NASDAQ:KHC) appears to have found a turn around. The company’s stock has slowly recovered since the start of the third quarter of 2019, and its reported results seem to have given the climbing stock price justice.

Last Thursday, Kraft Heinz reported its earnings for the third quarter. The company unexpectedly beat earnings estimates by delivering 69 cents in earnings per share compared analysts estimates of 54 cents per share. Its shares soared 13% for the day.

Moreover, Kraft Heinz actually delivered lower revenue for the quarter. At a 4.8% year on year revenue decline, the company was able to reap more profits minus any major write downs in its business this quarter. The company also reported $380 million in ‘other income’ compared to $71 million a year ago, therefore leading to better profitability.

Despite the recent climb in its stock price, Kraft Heinz is still down 24% year-to-date after it slashed its dividend and wrote down $15 billion worth of its brands earlier this year.

At its current price range of $32 to $33 a share, Kraft Heinz remains undervalued per its forward earnings expectations, having a forward price-earnings ratio of 12 compared to a five-year average of 19.

Nonetheless, the company is still not out of the woods yet. Analysts expect for Kraft Heinz to continue delivering declining earnings, even more so in the upcoming fourth quarter. Analysts' consensus estimates are set to where the company will report a poor 28% drop in earnings-per-share for the coming quarter that will end in December, but perhaps this is too dire of a forecast considering the company's recent third quarter success.

Disclosure: No shares in Kraft Heinz.

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About the author:

Mark Yu
I'm a doctor in physical therapy (DPT) with an interest in finance. Not a registered financial analyst. Value seeker. Long only. Global investing. Long-term investing.

I attempt to dissect one company filing every day. I dislike goodwill and intangible assets.

One company (review) a day keeps the speculation (hopefully) away.

"The only source of knowledge is experience."

"I have no special talent. I am only passionately curious." - Albert Einstein

"To strive, to seek, to find, and not to yield." - Alfred, Lord Tennyson

"We find one a year, that's terrific. You do not need a hundred or a thousand great investment ideas to do well. You need a couple. And, the discipline is the most important thing." - Warren Buffett

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