Turnaround Letter Buy-recommended Kraft Heinz Company (KHC) reported stronger-than-expected profits which boosted KHC shares 13% on Thursday. While revenues were slightly below consensus, adjusted earnings of $0.69/share were 28% higher than the consensus estimate, while adjusted EBITDA was 6% higher than consensus. The company is producing smaller losses and declines compared to the first half of the year, partly due to better pricing and cost-cutting, partly due to favorable input cost inflation over which it likely has little control. Debt of $30.7 billion was about $500 million lower than at year-end. However, revenues continued to decline (-1.1% after adjustments for divestitures and currency) as volumes and mix remain in negative territory. Adjusted net income fell 9% from a year ago, and adjusted EBITDA fell 8%, so despite the “beat” relative to consensus Kraft Heinz clearly has major work ahead of it. On the conference call, the company deflected discussions about its dividend, pending their strategic review and plan which will be released early next year. Under new CEO Miguel Patricio, the turnaround has barely started, and Patricio is mostly finding root causes of problems (there are many) rather than executing on a specific plan yet, but the start is nevertheless encouraging.
Kraft Heinz Press Release: 3Q 2019 Earnings
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