The Kraft Heinz Company KHC posted fourth-quarter 2024 results, wherein the bottom line grew year over year and surpassed the Zacks Consensus Estimate, while the top line declined and missed the consensus mark. Sales continued to be pressurized by volatile consumer behavior stemming from economic uncertainty.
Looking ahead to 2025, the company remains focused on executing its strategic priorities, particularly advancing product innovation, strengthening brand equity through the Brand Growth System, expanding Away From Home partnerships and increasing distribution across Emerging Markets.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
KHC’s Quarterly Performance: Key Insights
Kraft Heinz posted adjusted earnings of 84 cents per share, beating the Zacks Consensus Estimate of 78 cents. Quarterly earnings rose 7.7% year over year, mainly due to reduced shares outstanding and lower taxes on adjusted earnings.
Kraft Heinz Company Price, Consensus and EPS Surprise
Kraft Heinz Company price-consensus-eps-surprise-chart | Kraft Heinz Company Quote
The company generated net sales of $6,576 million, down 4.1% year over year. Net sales included an unfavorable currency impact of 0.8 percentage points and an adverse impact of 0.2 percentage points from divestitures. Net sales fell short of the Zacks Consensus Estimate of $6,666 million. Organic net sales fell 3.1% year over year. Our model suggested a 2.1% dip in organic sales.
Pricing inched up 1 percentage point year over year. The upside was driven by increases in the North America and Emerging Markets segments, although this was somewhat countered by flat pricing in International Developed Markets. The favorable pricing was a result of adjustments in certain categories to address higher input costs. The volume/mix dropped 4.1 percentage points from the prior year’s levels, with declines across all segments. Volume/mix continued to bear the brunt of changing consumer behavior stemming from economic uncertainty, along with softness in U.S. Away from Home.
The adjusted gross profit of $2,262 million decreased from the $2,384 million reported in the year-ago quarter. The adjusted gross margin contracted 40 basis points (bps) to 34.4%. We had expected an adjusted gross margin decline of 80 bps to 34%.
Adjusted operating income declined 0.3% to $1,385 million due to adverse volume/mix, higher manufacturing and procurement costs and foreign currency headwinds. This was partly compensated by reduced variable compensation expense, greater pricing, and gains from efficiency initiatives.
Decoding KHC’s Segment-Wise Results
North America: Net sales of $4,968 million declined 3.9% year over year. Organic sales fell 3.6%. We had projected a 3.1% decline in segment organic sales. During the quarter, pricing moved up 0.9 percentage points, but the volume/mix fell 4.5 percentage points.
International Developed Markets: Net sales of $913 million were down 3.6% year over year. Organic sales declined by 4%, with pricing flat and volume/mix dipping 4 percentage points.
Emerging Markets: Net sales of $695 million were down 6.8% year over year. Organic sales rose 2.2%, with pricing up 4.2 percentage points but volume/mix down 2 percentage points.
Kraft Heinz: Other Aspects
Kraft Heinz ended the quarter with cash and cash equivalents of $1,334 million, long-term debt of $19,215 million and total shareholders’ equity (excluding noncontrolling interest) of $49,185 million. Net cash provided by operating activities was $4.2 billion for the full-year 2024, and free cash flow was $3.2 billion.
During the year, Kraft Heinz paid cash dividends worth $1.9 billion and made share buybacks worth $988 million. As of Dec. 29, 2024, the company had shares worth $1.9 billion remaining under its buyback plan.
In a separate press release, Kraft Heinz declared a quarterly dividend of 40 cents per share, payable on March 28, 2025, to its shareholders of record as of March 7.
What to Expect From KHC in 2025?
For 2025, organic net sales growth is expected in the range of flat to down 2.5%. Management anticipates organic sales to improve sequentially throughout all quarters in 2025, including a flat to somewhat positive contribution from pricing.
The adjusted operating income is projected to decline in the range of 4-1% at constant currency. This forecast expects adjusted gross margin growth in the range of flat to expand slightly.
The adjusted EPS for 2025 is envisioned in the range of $2.63-$2.74. The effective tax rate is likely to be about 26% and interest expense roughly $900 million in 2025.
For 2025, free cash flow is expected to be flat year over year.
Shares of this Zacks Rank #4 (Sell) company have dropped 7.9% in the past three months compared with the industry’s decline of 7.1%.
Three Solid Bets
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The consensus estimate for United Natural’s current financial-year sales and earnings indicates growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.
TreeHouse Foods THS, a private-brand snacks and beverages company, presently holds a Zacks Rank #2 (Buy). THS delivered a trailing four-quarter earnings surprise of 20.4%, on average.
The Zacks Consensus Estimate for TreeHouse Foods’ full-year 2025 sales and earnings implies growth of 1.2% and 24.9%, respectively, from the year-ago period’s reported figure.
US Foods Holding USFD, which engages in the marketing, sale and distribution of fresh, frozen, and dry food and non-food products, currently carries a Zacks Rank #2. USFD delivered a positive earnings surprise of 3.7% in the last reported quarter.
The consensus estimate for US Foods’ full-year sales and earnings calls for growth of 5.2% and 22.1%, respectively, from the prior-year reported levels.
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