Heinz Reports In Line - Analyst Blog

H.J. Heinz Co. (HNZ) posted robust earnings of 75 cents per share for the first quarter of fiscal 2011. The result was in line with the Zacks Consensus Estimate but came in ahead of the 68 cents per share recorded in the year-ago quarter. Profits were driven by strong performances in Emerging Markets and North American Consumer Products segments.

Quarterly Sales Details

During the quarter, Heinz recorded total sales growth of 1.6% to $2.48 billion from $2.44 billion in the prior-year quarter. The growth was primarily driven by a 2.5% gain in volume, 1.1% benefit from increased pricing, which was partially offset by a 2.1% unfavorable impact from foreign currency translations. Organic sales for the quarter grew by 3.6%. However, total sales fell short of the Zacks Consensus Estimate of $2.51 billion.

Segment and Margin Details

All the five segments of the company reported growth during the quarter. Asia/Pacific segment led with a strong growth of 19.0% year-over-year. In addition, Rest of the World segment posted a 12.6% growth while Europe reported a 7.7% increase. North American Consumer Products and the U.S. Foodservice segments also grew 4.8% and 2.3% respectively.

Heinz’s gross profit grew by 4.1% year-over-year to $907.9 million, while gross margin rose by 88 basis points (bps) to 36.6%. The improvement was mainly attributable to productivity gains and increased net pricing.

Selling, general and administrative expenses, as a percentage of sales, declined 37 bps to 20.2%. Accordingly, operating income grew by 9.9% year-over-year to $405.7 million, while operating margin increased by 119 bps to 16.3%

Cash Flow and Outlook

For the first quarter of fiscal 2011, Heinz generated $272.4 million of cash from operations, deployed $5.5 million towards capital expenditures and received $205 million from asset disposals, leading to a strong free cash flow of $2.1 billion.

Moving forward, the company reaffirmed its guidance. Heinz expects fiscal 2011 earnings per share to grow 7% to 10% on sales growth of 3% to 4%. The Zacks Consensus Estimate is currently pegged at $3.05 per share, which represents a growth of 6.3% over earnings from continuing operations of $2.87 per share recorded in fiscal 2010.
 
HEINZ (HJ) CO (HNZ): Free Stock Analysis Report
 
Zacks Investment Research