Kraft Heinz Misses Estimates Adding Pressure to Make a Deal

• February 16 2018
• Craig Giammona

Kraft Heinz Co.’s sales and profit fell short of Wall Street expectations last quarter, adding pressure on the food giant to fuel growth with a large acquisition.

Kraft Heinz Co.’s sales and profit fell short of Wall Street expectations last quarter, adding pressure on the food giant to fuel growth with a large acquisition.

Earnings amounted to 90 cents a share in the fourth quarter, excluding some items, the company said on Friday. That was a nickel below analysts’ estimates. Though sales grew for the second straight quarter -- reversing a string of declines -- they still missed projections.

One year after Kraft Heinz was rebuffed in a bid to buy Unilever, the weak results threaten to renew speculation that it needs a blockbuster deal. The shares fell as much as 1.3 percent in premarket trading after the report was released.

Kraft Heinz Chief Executive Officer Bernardo Hees said the U.S. tax overhaul will help the company in 2018, but its results last year were disappointing. “Our financial performance in 2017 did not reflect our progress or potential,” he said in a statement.

Sales came in at $6.88 billion last quarter, while analysts had estimated $6.91 billion on average.

Since the U.S. tax changes passed late last year, the company has made plans to invest some of the savings. That includes using $800 million for capital expenditures, Kraft Heinz said. The company also vowed to put $1.3 billion into retirement benefit plans, and another $300 million toward “strategic investments to build our capabilities, our people skills and our brands.”

Kraft Heinz was created in a 2015 merger orchestrated by 3G Capital and Warren Buffett’s Berkshire Hathaway Inc. Two years earlier, those backers had teamed up to take Heinz private -- with a strategy of slashing costs and ramping up profit margins. That’s been the playbook at the new combined company too.

The shares fell as low as $71.78 in early trading on Friday. They had been down 6.5 percent this year through Thursday’s close.