Shares of food producer Kraft Heinz (KHC -3.67%) posted a significant price drop on Wednesday morning. A mixed fourth-quarter report left a bad taste in investors' mouths, and the stock opened 7.9% lower. It recovered to a 3.5% price drop as of 11 a.m. ET, but Kraft Heinz's stock is still exploring multiyear lows today.
The company behind popular food brands such as Oscar Mayer, Kool-Aid, and Velveeta saw fourth-quarter sales fall 5% year over year to $6.58 billion. Adjusted earnings rose by 8% to $0.84 per diluted share. The average Wall Street analyst was looking for earnings near $0.78 per share on revenues in the neighborhood of $6.7 billion. Kraft Heinz beat the bottom-line targets but fell short of revenue expectations.
Looking ahead, management set up disappointing guidance for fiscal year 2025. The company expects to generate full-year earnings of approximately $2.68 per share, 12% below last year's result and short of the consensus forecast at $3.04. This weak bottom-line forecast erased the price support Kraft Heinz might have enjoyed from the robust fourth-quarter showing.
Kraft Heinz is hampered by unfavorable foreign currency trends, a price-sensitive consumer population, and rising ingredient costs. That's a troublesome combination, forcing Kraft Heinz to make uncomfortable pricing decisions. Profit-preserving price increases are likely to result in lower unit sales in this inflation-wary economy.
CEO Carlos Abrams-Rivera is seeking new deals in sit-down restaurants and better distribution into emerging markets.
The stock trades at just 9.3 times adjusted earnings today, and the 5.6% dividend yield is one of the highest figures in the S&P 500 index. Kraft Heinz is a turnaround story in progress. If you expect its valuable brands and massive distribution network to win out in the long run, Kraft Heinz could be a great value investment right now.
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