Why Kraft Heinz Stock Tumbled by 3% on Wednesday

The news affecting food industry mainstay Kraft Heinz (NASDAQ: KHC) on Wednesday wasn't all that encouraging, and investors sold out of the stock to cut its price down by more than 3%. That decline was steeper than the 0.3% drop of the S&P 500 index that day.

A mixed third quarter

Kraft Heinz's third-quarter release showed that the company's net sales fell by nearly 3% on a year-over-year basis to $6.38 billion. That compared unfavorably to the average analyst estimate, which was slightly higher at $6.43 billion.

On the bottom line, rather uncomfortably Kraft Heinz flipped to a loss. Its deficit for the quarter was $290 million, against the $254 million profit in the year-ago quarter. Yet on a non-GAAP (adjusted) per share basis, the company was actually in the black with an $0.75 per share profit. Even better, this topped the $0.72 it earned in the third quarter of 2023.

During the quarter, Kraft Heinz suffered declines in all three of its regions: North America, international developed markets, and emerging markets. Of the trio, North America is by far the largest, and it booked the most precipitous year-over-year sales drop (3.4%).

Guidance updated

In the earnings release, Kraft Heinz quoted CEO Carlos Abrams-Rivera as saying that "When we look at our U.S. Retail business, we are expecting more of an elongated recovery, driven by specific categories that continue to experience pressure."

In line with this, Kraft Heinz updated its full-year 2024 guidance. It now believes that organic (i.e., adjusted) net sales growth will come in at the low end of its previously published outlook of flat to 2% growth over 2023. Adjusted earnings should also land close to the bottom of the proffered range, in this case $3.01 to $3.07 per share.

A more fundamental problem for Kraft Heinz than the theoretical weakness of the global economy is its product mix. The company isn't offering much these days that is fresh or innovative, and is behind the curve in the healthy eating trend currently in force with consumers.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Kraft Heinz. The Motley Fool has a disclosure policy.