Kraft Heinz Q2 Earnings Hurt by Inflationary Pricing

Kraft Heinz (KHC) shares dropped 0.89% early Wednesday after the company missed analysts' estimates for net sales, with consumers shying away from higher prices.

By 12 p.m. EDT, the shares had recovered their morning losses and were up nearly 1%.

In its second-quarter earnings release, the company noted net sales had risen to $6.72 billion from $6.55 billion in the same period last year. That still lagged analysts' estimates of $6.81 billion.

The company posted adjusted EBITDA of $1.6 billion, up 6%, while its adjusted earnings per share (EPS) of 79 cents was up nearly 13% from the last year as the company was steered toward increased profitability. Kraft Heinz reiterated its guidance for the year of 4% to 6% organic net sales growth.

Inflationary pressures have hit the outlook for Kraft Heinz as the company continued to raise prices over the last two years to protect margins from elevated supply-chain costs, but consumers have become more cost-conscious since then. Product prices at the firm were higher by 11 percentage points in the second quarter, which led to a 7-percentage-point drop in sales volume. That was a bigger drop than the 5.3-percentage-point year-over-year decline posted in the prior quarter.

"In the U.S., price gaps have expanded relative to both private-label and branded competition. We have seen branded competition increase their levels of promotion, while we have remained more disciplined," Kraft Heinz said in its earnings report.

The company could get a boost in the coming quarters after the U.S. Federal Reserve recently pressed pause on its campaign of interest rate hikes, with consumer price inflation receding at the fastest pace since 2021.