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Kraft Heinz Stock Is Surging Because Beating Earnings Estimates Is Becoming a TrendKraft Heinz Stock Is Surging Because Beating Earnings Estimates Is Becoming a TrendRoot, Al.Barron's (Online); New York Thursday morning, Kraft Heinz reported solid third quarter earnings. That's good news for investors. It's also a sign corporate-turnaround efforts being led by new CEO Miguel Patricio are having an effect. That's better news for investors. Kraft stock, as a result, is rising. Kraft (ticker: KHC) earned 70 cents a share on $6.4 billion in sales. Wall Street was looking for EPS of 62 cents on $6.3 billion in sales. Sales grew 6% year over year. It's the seventh consecutive earnings "beat" since weak 2018 performance pushed the stock lower and, eventually, led to the hiring of a new chief executive. Free cash flow, another important metric, came in at roughly $1 billion in the third quarter, better than the roughly $500 million analysts projected. It is a solid earnings print. Shares are up about 2% in premarket trading. Kraft stock is surging 3.2% to $30.16 in Thursday morning trading. "We are building momentum, and we are confidently optimistic about our near-term performance," said CEO Patricio in the company's news release . "We are heading into 2021 with our new operating model fully implemented, our platform strategy coming to life in the marketplace, and our growth investments ramping up." The new model was a necessity after weak performance in 2018 left the company with too much debt and Wall Street questioning if the dividend would be maintained. Shares fell about 45% in 2018 and another 25% in 2019 as investors fretted about the future. But the dividend is still running at 40 cents a quarter. The stock is yielding about 5.5%, higher than food peers. Covid , of course, actually helped the company manage the turnaround as people ate more at home, driving people back to Kraft brands. Kraft is using the cash flow boon to pay down debt. Total leverage will fall by about $2 billion in 2020. Relative debt levels are still above peers, but are moving in the correct direction. Barron's recently wrote positively about Kraft stock, believing the dividend could be maintained while operations were improved and debt paid down. Since that article first appeared in February, shares are up 1% as of this morning, excluding dividends. The S&P 500 index, for comparison, is down 2% over the same span. The Dow Jones Industrial Average, however, is down 9%. But, the $1.20 in Kraft dividends collected since February represent about 4% of the stock price paid back then, higher than the comparable yield of the broader market. |
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