Heinz Results Show Strong EM Growth

-21.21%
Downside
72.49
Market
57.12
Trefis
HNZ: H.J. Heinz logo
HNZ
H.J. Heinz

H.J.Heinz Company (NYSE:HNZ) announced its Q4 results on May 24, 2012. The company delivered modest results although they were impacted by one-time productivity initiatives and currency headwinds. Total revenues for the quarter stood at $3.05 billion, up 5.6% on a y-o-y basis. Revenues were also boosted by the acquisition of Quero in 2011. Net income for the quarter stood at $175.34 million or $0.54 per share against $0.69 in the same quarter previous year. However, excluding special charges which included productivity initiatives of $86 million, net earnings stood at $0.81 per share. [1]

See our full analysis for H.J Heinz Company

Operating Margins Show Promise

Margins were impacted negatively by high commodity inflation. Excluding the impact of special charges, gross margins for the quarter fell to 34.8% vs 36.3% in the corresponding quarter previous year. However, operating income (excluding special items) stood at $414 million, or 13.6% of revenues, compared to 13.4% previous year. Margins have shown resilience on a sequential basis helped by lower volatility in food prices and a general decrease in SG&A (selling, general and administrative) expenses. For the calendar year 2012, we expect the adjusted EBITDA margins to show some improvement.

Relevant Articles
  1. Heinz Savors Emerging Markets Growth And Reaffirms Brand Strength
  2. Heinz $28 Bn Acquisition Price Implies Faster Global Growth And Thicker Margins Ahead
  3. A Snapshot Of Our $57 Price Estimate For Heinz
  4. Heinz’s Thicker Margins And Global Growth Will Lift Results
  5. A Vote For Beer
  6. Heinz Q1 Earnings Show Big Emerging Markets Growth And Negative Currency Impacts

Ketchup continued to be the growth driver for the company with a 6.8% increase in revenues for the quarter. Heinz benefits from its high brand recognition in ketchup segment and has even added Heinz Ketchup Blended with Balsamic Vinegar to its portfolio after launching the product temporarily. Revenues for the broader ketchup and sauces segment rose 10.2% to $1.39 billion.

For the upcoming fiscal year, the company expects organic sales growth of at least 4% with emerging markets contributing 25% to total sales. However, if the US Dollar continues to remain strong, the company could witness its EPS declining by 2%.

We currently have a $51.21 Trefis price estimate for H.J. Heinz Company, and we are in the process of revising our estimates to incorporate the latest earnings.

Understand How a Company’s Products Impact its Stock Price at Trefis

Notes:
  1. Heinz Fourth-Quarter EPS Rose 17.4% to $0.81 before Special Charges ($0.54 Reported) and Sales Grew 5.6% Driven by Emerging Markets and Global Ketchup, news.heinz.com, May 24, 2012 []