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The Kraft Heinz Co - Stock Quote KHC

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Morningstar's The Kraft Heinz Co Stock Analysis

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Despite Q1 Hit, We Don't Think Inflation Will Eat Kraft Heinz's Lunch; Shares Still a Bargain

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Heading into no-moat Kraft Heinz’s first-quarter report, the chief question was how volumes fared against the backdrop of pronounced price hikes. In our view, a mere 2% retraction in volumes against a 9% price increase suggests the strategic playbook CEO Miguel Patricio cooked up nearly three years ago (centered on upping the ante on brand spending and bolstering its category management and e-commerce capabilities) is proving an enticing recipe. Profits didn’t hold up quite as well, though, and inflation seems unlikely to abate; management now expects a midteens hit from higher input costs in fiscal 2022, up from low-teens prior. In this context, the adjusted gross margin slipped 250 basis points to 31.9% in the quarter, and the adjusted operating margin contracted 260 basis points to 18.6%.

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The Kraft Heinz Co's Company Profile

Business Description

In July 2015, Kraft merged with Heinz to create the third-largest food and beverage manufacturer in North America behind PepsiCo and Nestle and the fifth-largest player in the world. Beyond its namesake brands, the combined firm's portfolio includes Oscar Mayer, Velveeta, and Philadelphia. Outside North America, the firm's global reach includes a distribution network in Europe and emerging markets that drive around one fifth of its consolidated sales base, as its products are sold in more than 190 countries and territories.

One PPG Place
Pittsburgh, PA, 15222
T +1 412 456-5700
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Mar 31, 2022
Fiscal Year End Dec 25, 2022
Stock Type Slow Growth
Employees 36,000

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