H. J. Heinz Earnings Cheat Sheet: Increasing Costs Tighten Margins as Net Income Falls

S&P 500 (NYSE:SPY) component H. J. Heinz Company (NYSE:HNZ) reported its results for the second quarter. HJ Heinz manufactures food products, including ketchup, condiments and sauces, frozen food, soups, beans and pasta meals, infant nutrition and other food products.

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

H. J. Heinz Company Earnings Cheat Sheet for the Second Quarter

Results: Net income for the food company fell to $237 million (73 cents per share) vs. $251.4 million (78 cents per share) a year earlier. This is a decline of 5.7% from the year earlier quarter.

Revenue: Rose 8.3% to $2.83 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: HNZ reported adjusted net income of 81 cents per share. By that measure, the company beat the mean estimate of 80 cents per share. It fell short of the average revenue estimate of $2.91 billion.

Quoting Management: Heinz Chairman, President and CEO William R. Johnson said: “Led by our trio of growth engines – Emerging Markets, Global Ketchup and our Top 15 brands – reported sales grew more than eight percent and Heinz delivered organic sales growth for the 26th consecutive quarter despite the challenging economic environment in Developed Markets, especially in Australia and U.S. Foodservice. Overall, we saw a combination of continued strength in Emerging Markets, the U.K. and much of Europe, and mixed results in other developed markets, where consumer confidence fell to its lowest level in 30 years.”

Key Stats:

Gross margin shrank 2.7 percentage points to 34.3%. The contraction appeared to be driven by increased costs, which rose 13% from the year earlier quarter while revenue rose 8.3%.

Revenue has risen the past four quarters. Revenue increased 14.9% to $2.85 billion in the first quarter. The figure rose 6% in the fourth quarter of the last fiscal year from the year earlier and climbed 1.5% in the third quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the first quarter, net income fell 6% from the year earlier quarter.

The company has now beaten estimates the last two quarters. In the first quarter, it topped expectations with net income of 78 cents versus a mean estimate of net income of 76 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the third quarter has moved down from 93 cents a share to 90 cents over the last ninety days. For the fiscal year, the average estimate has moved down from $3.35 a share to $3.33 over the last ninety days.

Competitors to Watch: Ralcorp Holdings, Inc. (NYSE:RAH), Smart Balance, Inc. (NASDAQ:SMBL), TreeHouse Foods Inc. (NYSE:THS), The Hain Celestial Group, Inc. (NASDAQ:HAIN), Campbell Soup Company (NYSE:CPB), ConAgra Foods, Inc. (NYSE:CAG), Kraft Foods Inc. (NYSE:KFT), General Mills, Inc. (NYSE:GIS), Unilever plc (NYSE:UL), and Unilever N.V. (NYSE:UN).

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

 

More from The Cheat Sheet