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H.J. Heinz (HNZ) 2Q EPS Tops Estimates, Reaffirms Forecast

 November 20, 2012 08:01 AM

(By Balaseshan) Ketchup and soups maker H.J. Heinz Co. (NYSE: HNZ) reported better-than-expected quarterly earnings and reaffirmed strong growth forecast reflecting double-digit growth in Emerging Markets as well as improved productivity and higher margins.

H.J. Heinz said the second quarter results reflected dynamic sales growth in Emerging Markets, continued growth in Global Ketchup and its Top 15 Brands, and a favorable tax rate.

Earnings were $289.44 million or $0.90 per share for the second quarter, up from $237.01 million or $0.73 per share in the year-ago quarter.

Excluding special charges for productivity initiatives last year, earnings per share (EPS) grew 11.1 percent to 92 cents. EPS this year was reduced by $0.02 from unfavorable foreign currency translation and translation hedges.

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Sales rose 0.5 percent to $2.83 billion, reflecting the unfavorable impact of 2.4 percent from foreign currency exchange rates. On a constant currency, continuing operations basis, sales grew 2.9 percent.

Analysts, on average, polled by Thomson Reuters expected earnings of 88 cents per share on sales of $2.85 billion for the second quarter.

In the preceding first quarter, H.J. Heinz earned 87 cents excluding special charges on sales of $2.79 billion.

Net pricing increased 1.9 percent for the second quarter and volume grew 1.4 percent. Divestitures reduced total sales by 0.4 percent.

In Emerging Markets, organic sales jumped 13.2 percent and represented a record 23% of total company sales. Global Ketchup registered organic sales gains of 5.0 percent, boosted by increase in sales in the U.S., Brazil and Russia. The company's Top 15 Brands posted increase in organic sales of 4.6 percent.

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Gross profit margin, excluding charges, increased 40 basis points despite a $22 million unfavorable impact from foreign exchange and higher commodity costs.

Looking ahead for fiscal 2013, the Pittsburgh, Pennsylvania-based company said it is on track to meet its forecast. It still expects EPS from continuing operations in the range of $3.52 to $3.62, on organic sales growth of at least 4 percent. Analysts expect EPS of $3.52 for the year.

For fiscal 2013, the company anticipates constant currency EPS growth of 5 percent to 8 percent on a continuing operations basis and excluding productivity initiatives in fiscal 2012. Strong operating free cash flow is predicted to be $1 billion-plus.

The stock, which has been trading in the 52-week range between $49.75 and $58.86, closed Monday's regular trading up 1.12 percent at $58.72.

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