Heinz results stir appetite for food groups

Knight Capital falls after board appointments

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HJ Heinz were higher in a mixed market on Tuesday after the ketchup maker’s chairman announced ahead of its earnings that the company’s first-quarter sales and profits had recorded positive growth.

William Johnson, president and chief executive officer of Heinz, said organic sales in the period had increased 5 per cent and net income grew 10 per cent.

His comments sent the stock up as much as 3 per cent and closed 1.7 per cent higher to $57.41 in the day before the official release of the figures on Wednesday.

Heinz shares have gained 6.2 per cent so far this year.

Mr Johnson, however, also noted that the business environment remained challenging due to the weak economy and volatile foreign currency trends.

Ann Gurkin, analyst at Davenport & Company, said: “Heinz has built a strong portfolio of brands, and we remain impressed by the global management team, which is a key asset for the company to expand its presence in emerging markets.”

David Driscoll, analyst at Citigroup, raised the 12-month target price for the stock to $62 from $56.46 and said Heinz was on a solid footing for 2013 as there would be continued growth fuelled by demand, especially in Brazil.

But Alexia Howard, analyst at Bernstein Research, cautioned that Heinz was also facing some near-term pressure from the developed markets, such as North America and Australia, which generated 31 per cent of the company’s total revenue.

Other food stocks moved up. Kraft Food added 0.3 per cent to $41.86 and Tyson Foods, the meat producer, increased 4.6 per cent to $15.62.

The consumer staples sector, which includes Heinz, was one of the top three subgroups that led gains. The defensive subgroup added 0.1 per cent on Tuesday and has increased 9.6 per cent year-to-date.

Elsewhere, shares in Knight Capital, the broker and electronic trading company that was hit by a software glitch, fell after three new members were named to its board as part of its $440m bailout. The stock traded 1.1 per cent lower at $2.75.

Knight, which had dominated trading in NYSE and Nasdaq-listed stocks, has seen its shares slump 73.4 per cent so far this month after it was crippled by erroneous orders in nearly 150 stocks trading on the New York Stock Exchange earlier this month.

Lexmark International rose 13.7 per cent to $21.62 after the printer maker said it would cut 1,700 staff worldwide and close a manufacturing plant in the Philippines to save costs.

Overall, US equities were mixed as data showed that housing prices were rebounding. However, a decline in consumer confidence – the steepest since October 2011 – remained a concern for many. Meanwhile, investors were still watching for signs of further stimulus by central banks.

The S&P 500 dropped 0.1 per cent to 1,409.30. The Dow Jones Industrial Average decreased 0.2 per cent to 13,102.99 but the tech-heavy Nasdaq Composite Index gained 0.1 per cent to 3,077.14.

William Stone, chief investment strategist at PNC Wealth Management, said: “Chairman Bernanke’s speech at the Federal Reserve’s Jackson Hole conference and any developments out of Europe will be in focus for markets this week.”

Paul Hickey, co-founder of Bespoke Investment Group, said: “While the market may look overbought here, historically investors have been very willing to jump back in and drive the market even higher once they have been assured that the correction is over and the bull market has resumed.”

Technology stocks were mixed. Apple, which hit a record high on Monday, edged 0.1 per cent lower to $674.80, but Facebook added 1 per cent to $19.34 – still below the closely watched $20 threshold.

Google gained 1.2 per cent to $677.25 and Microsoft ticked 0.2 per cent lower to $30.64.

Seven of the 10 S&P sectors traded in negative territory. The defensive telecoms subgroup, which has been favoured by investors in the volatile macroeconomic environment, led losses and declined 0.4 per cent.

AT&T fell 0.6 per cent to $36.64 and its rival Verizon also decreased 0.2 per cent to $42.67.

Bank stocks edged lower. Bank of America slid 1.4 per cent $7.96, Citigroup fell 1.2 per cent to $29.34 and JPMorgan Chase dropped 0.3 per cent to $37.13.

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