(Reuters) -Kraft Heinz on Wednesday raised its 2023 profit estimates for the second time this year after topping quarterly earnings estimates on higher prices for its packaged meals and condiments, sending its shares 5% higher in early trading.
Prices rose 7.1 percentage points in the third quarter as Kraft Heinz like other packaged food makers benefited from price hikes undertaken during the past two years to counter steep supply chain and commodity costs.
Higher prices of Lunchables and Mac and Cheese Cups and easing supply-chain snags and powered a 396 basis points expansion in adjusted gross margin to 34% in the quarter, Kraft Heinz said.
However, there were signs that the prices hikes were starting to take a toll on demand from inflation-weary customers as overall volumes slipped 5.4 percentage points.
“We expect subdued stock reaction due to concerns about continued volume deceleration into 2024 from raising prices too high,” TD Cowen analyst Robert Moskow said.
Kraft Heinz’s sales growth in North America was pressured by its meats category as higher prices led customers to cut back on meat purchases.
The Jell-O maker also flagged demand softness in Asia markets but expects a return to normal levels of growth in the fourth quarter.
Kraft Heinz forecast full-year adjusted profit in the range of $2.91 to $2.99 per share, compared with $2.83 to $2.91 earlier.
The Philadelphia Cream Cheese maker logged adjusted earnings of 72 cents per share for the quarter ended Sept. 30, above analysts’ estimates of 63 cents, according to LSEG data.
But quarterly net sales of $6.57 billion missed expectations of $6.72 billion.
(Reporting by Savyata Mishra and Annett Mary Manoj; Editing by Devika Syamnath)
