H. J. Heinz Earnings Cheat Sheet: Margins Suffer as Costs Rise, Profit Falls

Rising costs hurt S&P 500 (NYSE:SPY) component H. J. Heinz Company (NYSE:HNZ) in the first quarter as profit dropped from a year earlier. HJ Heinz Co. manufactures food products, including ketchup, condiments and sauces, frozen food, soups, beans and pasta meals, infant nutrition and other food products.

Investing Insights: Steve Jobs Prepares to Deliver a New Catalyst for Apple’s Stock.

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

Results: Net income for H. J. Heinz Company fell to $226.1 million (70 cents per share) vs. $240.4 million (75 cents per share) a year earlier. This is a decline of 6% from the year earlier quarter.

Revenue: Rose 14.9% to $2.85 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: HNZ reported adjusted net income of 78 cents per share. By that measure, the company beat the mean estimate of 76 cents per share. It beat the average revenue estimate of $2.78 billion.

Quoting Management: Heinz Chairman, President and CEO William R. Johnson said: “Emerging Markets generated a record 23% of our sales in the first quarter, up from 18% a year ago. Our strategy to accelerate growth in Emerging Markets organically and through acquisitions in countries with fast-growing populations helped Heinz deliver strong top-line growth and solid operating results despite the economic downturn in Developed Markets. Heinz also drove strong growth in global ketchup and our Top 15 brands by focusing on value-added consumer innovation and new product development.”

Key Stats:

Last quarter’s profit decrease breaks a streak of four consecutive quarters of year-over-year profit increases. In the fourth quarter of the last fiscal year, net income rose 16.4% from the year earlier, while the figure increased 19.8% in the third quarter of the last fiscal year, 8.6% in the second quarter of the last fiscal year and 13.1% in the first quarter of the last fiscal year.

Gross margin shrank two percentage points to 34.6%. The contraction appeared to be driven by increased costs, which rose 18.5% from the year earlier quarter while revenue rose 14.9%.

Revenue has now gone up for three straight quarters. In the fourth quarter of the last fiscal year, revenue rose 6% to $2.89 billion while the figure rose 1.5% in the third quarter of the last fiscal year from the year earlier.

The company topped expectations last quarter after falling short of forecasts in the fourth quarter of the last fiscal year with net income of 71 cents versus a mean estimate of net income of 72 cents per share.

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: Steve Jobs Prepares to Deliver a New Catalyst for Apple’s Stock.

(Source: Xignite Financials)

More from The Cheat Sheet