Yahoo Finance Kraft Heinz (KHC) Banks on Pricing to Mitigate Cost Inflation
The Kraft Heinz Company’s KHC solid pricing initiatives are aiding the company to counter increasing input costs. This was seen in fourth-quarter 2022 with both the top and bottom lines increasing year over year. Also, to digitalize the sales process and fuel growth in Latin America (“LATAM”), the company recently unveiled an extended alliance with BEES.
Pricing Action: Key Factor
Kraft Heinz’s strong pricing actions are helping the company mitigate the adverse impacts of cost inflation. In the fourth quarter of 2022, the company’s pricing rose 15.2 percentage points year-over-year, reflecting growth in both segments. The upside can be attributed to measures taken to counter increasing input costs.
In the North America segment, pricing moved up 14.2 percentage points in the quarter. International segment pricing moved up 18.5 percentage points. Robust pricing efforts boosted the company’s quarterly net sales, In the said quarter, the company generated net sales of $7,381 million, up 10% from the year-ago period. KHC expects that pricing action will continue to mitigate the high single-digit inflation anticipated in 2023.
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What Else is Driving Growth?
KHC has been committed to expansion for a while now. On Mar 20, 2023, the company unveiled its expanded partnership with BEES. This partnership will help the company digitize its sales process and spur growth in LATAM.
The abovementioned deal will help Kraft Heinz get access to retailers that were previously not reachable. Meanwhile, it will help grocery store chains, small "mom & pop" shops and foodservice organizations browse and stock a wide range of Kraft Heinz products. Also, the deal is likely to help Kraft Heinz enhance its Emerging Markets strategy by boosting the distribution network and serving the needs of regional retailers in the area.
The company also announced AGILE@SCALE in February 2022 to transform its business and unleash its full potential. This strategy will help the company enhance its agile expertise and capabilities through partnerships with technology giants and cutting-edge innovators.
Wrapping Up
Kraft Heinz has been grappling with the rising inflationary environment for a while now. On its last earnings call, management highlighted that it expects high-single-digit inflation during 2023. In this regard, the company anticipates higher conversion and input costs. Certainly, the persistence of these factors might be a concern for the company. However, the above-mentioned tailwinds are likely to help the company battle such hurdles.
Shares of this Zacks Rank #3 (Hold) company have increased 13.6% in the past six months compared with the industry’s growth of 7.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Key Picks
Some top-ranked stocks are Inter Parfums IPAR, Post Holdings, Inc. POST and General Mills, Inc. GIS.
IPAR has an expected long-term earnings growth rate of 15% and a trailing four-quarter earnings surprise of 36.2%, on average. Inter Parfums currently sports a Zacks Rank #1.
The Zacks Consensus Estimate for Inter Parfums’ current financial year sales suggests growth of 10.5% from the year-ago reported numbers.
Post Holdings is a consumer-packaged goods holding company. It currently carries a Zacks Rank #1. POST has a trailing four-quarter earnings surprise of 34.8%, on average.
The Zacks Consensus Estimate for Post’s current financial year sales and earnings suggests growth of 2.5% and 119.6%, respectively, from the prior year’s reported numbers.
General Mills, a global manufacturer and marketer of branded consumer foods sold through retail stores, currently carries a Zacks Rank #2. GIS has a trailing four-quarter earnings surprise of 8.1%, on average.
The Zacks Consensus Estimate for General Mills’ current financial year sales and earnings suggests growth of 5.7% and 6.9%, respectively, from the corresponding year-ago reported figures.
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