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>>> Kraft Heinz Stock Is Dropping. Earnings Were OK, but Guidance Was Missing.


Barron's

By Al Root

Feb. 13, 2020


https://www.barrons.com/articles/kraft-heinzs-earnings-dividend-sales-forecast-guidance-51581599609?siteid=yhoof2&yptr=yahoo


Food giant Kraft Heinz reported fourth-quarter earnings of 72 cents a share from $6.54 billion in sales, while Wall Street was looking for 68 cents and $6.61 billion in sales. Results look OK, but a lack of detail about 2020 was vexing investors Thursday.

Sales were about $70 million, or 1%, lighter than expected, but not too bad. Importantly, the company didn’t cut its dividend. Analysts had speculated that Kraft’s 40-cent quarterly payments might be reduced or eliminated, and moves in stock options had indicated expectations of a 20-cent cut.

But nothing happened. The company declared another 40-cent dividend, payable on March 27.

“While our 2019 results were disappointing, we closed the year with performance consistent with our expectations,” new CEO Miguel Patricio said. He took over in July 2019, hired from outside the company to help turn around its operations. “We have taken critical actions over the past six months to re-establish visibility and control over the business.”

Shares (ticker: KHC) were down 8% midmorning Thursday to $27.63. The issue was the earnings conference call. The company didn’t offer enough detail to satisfy investors. No formal 2020 earnings guidance was given, in a departure from previous years, and a detailed turnaround plan wasn’t laid out.

Investors and analysts are hungry for information. The company has a lot of debt and is predicting that operating profit will fall in 2020. Turning the company around won’t be easy. Sales fell about 2.2% year over year on a comparable basis. The company said pricing rose 2%, but changes to the volume of goods sold, and the mix of products, represented a 4.2% drag.

Debt, while a concern, did fall about $3.1 billion year over year. Kraft has about $27 billion of debt on its books. It made some progress in 2019 on its balance sheet.

The company also took another asset write-down, for $453 million. The charge, like declining sales, isn’t great news, but last year the company wrote off $15.4 billion of goodwill and other intangible assets because the values of its brands were falling. The 2020 write-down doesn’t come close to that. The psychological blow for investors won’t be close to the 2019 shock, either.

The results cap a tough year for the company. Shares were down almost 38% over the past 12 months as of Wednesday’s closing price, trailing far behind comparable gains of the S&P 500 and Dow Jones Industrial Average.

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