Kraft Heinz Q3 earnings were reported better than expected, fueled by the corporate changes brought in by the new CEO Miguel Patricio. This is the seventh consecutive positive earnings shown by the processed food company under the new CEO.
During Kraft Heinz Q3 earnings, the American conglomerate reported a return of 70 cents a share on $6.4 billion in sales against Wall Street estimates of an EPS of 62 cents on $6.3 billion in sales. Kraft showed a 6% increase in year over year sales. Shares are up about 2% in premarket trading.
Free cash flow was at $1 billion in the third quarter, better than the roughly $500 million analysts projected.
“We are building momentum, and we are confidently optimistic about our near-term performance,” said CEO Patricio in the company’s third quarter earnings news release. “We are heading into 2021 with our new operating model fully implemented, our platform strategy coming to life in the marketplace, and our growth investments ramping up.”
Patricio said Thursday that despite volatile demand and some production capacity constraints, Kraft Heinz adapted to meet higher demand and invested in advertising.
“We are holding on to new households and consumers at a greater rate than before,” he said on a call with investors.
Kraft Heinz Beats Q3 Earnings Estimates Seventh time
In 2018, the company performance went down with too much debt. Shares fell about 45% in 2018 and another 25% in 2019 as investors lost confidence in the company. There were doubts about the company being able to maintain its dividends.
But the dividend is still running at 40 cents a quarter. Kraft stock is yielding nearly 6% higher than its peers.
The Pandemic has helped the company with the people stuck at home and ordering more groceries. Kraft Heinz has increased factory capacity and production of high-demand items by about 20%. The company also shifted marketing to focus on products that are aplenty, said the company’s U.S. president, Carlos Abrams-Rivera Abrams. The food giant is promoting its boxed Kraft macaroni and cheese versus the single-serve microwavable cups that are in short supply.
The better economic returns have enabled the company to pare off its debts. Total leverage will fall by about $2 billion in 2020.
On the third quarter 2020 earnings call, CEO Patricio said that going forward the outlook for 2021 was positive.
“Our exceptionally strong third quarter performance reflects the agility of our organization and our ability to sustain momentum.
Second, the changes in consumer priorities continue to support greater at home consumption and increased demand for our brands. And our strategic work is moving from planning and organizing into action. Based on these three factors, we are raising our 2020 outlook and continue to expect 2021 results to be ahead of the strategic plan we finalized earlier this year.”