After leaving the market speculating about its financial performance, by delaying the first-quarter report, packaged food company Kraft Heinz (NASDAQ: KHC) will be releasing results for the first half of 2019 Thursday before the market opens. It will be the first earnings report under the company’s new CEO Miguel Patricio.
Investors will be following the event closely as the management is expected to provide updates on the recent restatement of financial statements, pursuant to an investigation by the Securities and Exchange Commission. The general sentiment has been downbeat ever since the accounting scrutiny exposed massive writedowns on the company’s key brands earlier this year.
Meanwhile, there has been an effort from the management to ramp up the company’s offerings, mainly in the baby food, condiments and meals categories. That, combined with the steps taken to revamp production and investments in go-to-market initiatives, is expected to boost revenues in the to-be-reported period. Also, the top-line growth will be catalyzed by the favorable volume mix in the local market.
Of late, cost escalation has been a major problem facing the American food industry, and Kraft Heinz is no exception. Higher manufacturing and logistics costs might put pressure on margins, dragging down profitability. Currently, analysts expect earnings of $0.61 per share for the March quarter on revenues of $6.06 billion.
In short, 2019 has been a difficult year for Kraft Heinz so far. Worse, the setback came at a time when the company faces warnings from market regulators and multiple banks for non-compliance. Also, the food industry as a whole is witnessing heightened competition.
In May, the company said it postponed the release of first-quarter results after an internal inquiry revealed lapses in its accounting policy. The probe was carried out based on a subpoena sent by the SEC in October last year. The findings led to the restatement of financial results for the last three years.
Among competitors, General Mills (GIS) recently reported a 7% growth in sales to $4.16 billion for its most recent quarter, which pushed up earnings by 6% to $0.83 per share.
Kraft Heinz’ stock is yet to recover from the massive loss that followed its dismal fourth-quarter performance and disclosure about the SEC investigation. In the last 52 weeks, the shares lost about 29% and plunged 48% since the beginning of the year.
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