Earnings Preview: Kraft Heinz might be hit by a slow Q4 in retail

Condiments giant Kraft Heinz Company (KHC) is scheduled to post its earnings after the closing bell on Thursday, Feb, 21.

The Street expects the maker of Jell-O pudding to earn 94 cents a share on revenue of $6.95 billion. This represents a 4.4% change in bottom-line and a 1.1% growth in top-line.

However, with the recent report by the US Department of Commerce regarding the retail slowdown in the country in December, many are of the view that company such as Kraft Heinz might miss the final quarter estimates.

This could put the company that brings us Oscar Mayer meats and Velveeta cheese in a precarious position as it might trigger a stock sell-off — adding to the woes of the already straining retail landscape.

With American fast-food giants post year-end earnings this time around, investors would also be on the lookout for how fierce competition is affecting leading players like Domino’s Pizza (DPZ) and McDonald’s (MCD). Domino’s would also be reporting earlier on the same day.

LOOKING BACK

In the previously reported third quarter, the surge in overseas sales and tax benefits pushed up Kraft Heinz’ adjusted earnings beyond analyst estimates. Shares climbed shortly after the announcement, despite a drop in GAAP earnings.

Net sales for the quarter inched up 0.7%, but organic net sales fell 0.4%. Sales declined in the US and Canada (North America region) but rose in other geographical areas.

Smaller new players entering the market have been taking a bite out of the company’s pie for some time now, but the upcoming quarterly report would also focus on the general retail behavior with lower-than-expected spending.

A few months ago, Kraft Heinz hinted at product revamps and renewed marketing efforts to revive sales momentum by year-end, especially to offset the squeeze on profitability from the rising cost inflation. Investors would also be looking for the results of these activities.

As the international brand reports earnings this week, many suggest keeping expectations low on fears of a retail slowdown. We’ll see how these factors really affected Kraft Heinz when it posts earnings on Thursday.

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