Will Heinz's (NYSE:HNZ) EPS Trump Lowered Sales Growth Guidance?

Heinz (NYSE:HNZ) has a solid second quarter driven by higher margins, but volume growth slid, generating the question of whether meeting EPS expectations in the current quarter will trump the possibility of lowered sales growth going forward.

Barclays (NYSE:BCS) said, "In its F2Q, HNZ reported a margin-driven EPS beat with a less severe FX hit also helping some. But volume growth decelerated sharply to +0.3% from +2.5% in 1Q. Truth be told, the volume sluggishness wasn't too surprising to us given the difficult operating environment and weak shipments across the industry of late. Plus, we get why HNZ is foregoing promotions that fail to produce a robust lift...What was surprising to many, however, was that management stuck to its +3-4% constant currency sales guidance for the year, which includes organic plus acquisition-driven growth.

"Even though we've shifted our EPS estimates higher (to $3.10 vs. $3.05) as a result of less onerous FX, we have to believe that HNZ's current +7% premium vs. the peer group contemplates a more robust volume picture on top of delivery against EPS targets. Simply said, we wonder if the market will be as willing to reward HNZ for meeting its EPS guidance if it may have to revise its sales growth expectations."

Barclays maintained their "Overweight" rating on Heinz, which closed Monday at $48.67, gaining $0.67, or 1.40 percent. They also raised their price target on them to $47.