Consumers are pushing back on pricing
- 4Q23 adjusted EPS of US$0.78 beats estimates, organic sales of US$6.9bn misses estimates
- Initiated FY24F guidance for +0-2% organic net sales growth and +1-3% adjusted EPS growth
- Volume recovery timeline in line with our previous expectations of 2H24
4Q23 EPS of US$0.78 – slightly above market expectations. Kraft Heinz (KHC) 4Q23 delivered adjusted EPS of US$0.78, above expectations of US$0.77, down 8.2% y-o-y (of which 6.9% ppt was due to additional week in 4Q22). Adjusted revenue for 4Q23 came in at US$6.9bn, down 7.1% y-o-y (of which 6.1% ppt was due to additional week in 4Q22). Revenue slightly missed estimates of US$7.0bn. Stripping out the effect of additional week in 4Q22, 4Q organic net sales declined by 0.7% on +3.7% price effect, offset by 4.4% volume/mix decline. The volume/mix decline largely came from North America with 5.5% decline on +2.5 price effect. Whereas international segment shown strong performance with 0.6% volume/mix decline on +7.7% price effect.
Initiated FY24F guidance of +0-2% organic net sales growth and +1-3% adjusted EPS growth. The company has guided for a flattish year in FY24F with pricing expected at +1%, below 3% expected inflation level and -1-1% volume improvement. North America consumers are expected to continue looking for value and sales performance could be under pressure going into 2024. We believe this is likely the key reason behind plans to price below inflation in order to ensure volume remains healthy and likely turn positive only in 2H24, in line with our previous expectations. Share price has justifiably corrected over 5%, in the trading day, likely on the stagnant growth guidance. We remain on the sidelines until we see a clear pathway to higher growth rates.