Strong net pricing seen as validation of strategy.

PITTSBURGH — In a tumultuous stock market environment, The Kraft Heinz Co. increasingly looks to investors like a shelter in a storm.

Over the past three months, share prices of Pittsburgh-based Kraft have climbed 7.6%, more than a 9 percentage point spread above the S.&P.500 which fell 1.4% over the same time period. Kraft shares rose in late February after the company announced better-than-expected earnings.

Kraft pro forma net income in the fourth quarter was $285 million, equal to 23c per share on the common stock, down from $323 million, or 27c per share. Sales were $7,124 million,
down 4.9%.

Adjusted EBITDA in the company’s United States segment was $4,783 million in 2015, up 6% from $4,499 million the previous year. Pro forma sales totaled $19,284 million, down 1.8% from $19,635 million in 2014.

“Pricing was neutral as higher net pricing across most categories was offset by the negative impact (approximately 1.5 percentage points) of lower overall key commodity costs (dairy, meat, coffee and nuts),” the company said. The 6% improvement in EBITDA was attributed principally to favorable pricing net of commodity costs, synergies and the benefit of a 53rd week during the fiscal year.

Investors appeared impressed not only by the earnings for 2015, which topped Wall Street analysts by 4c per share, but also by the manner in which the company achieved its profitability. In particular, Kraft’s prices net of costs, drew investor interest.

In Kraft’s Feb. 25 conference call with investment analysts, chief executive officer Bernardo Hees said the company’s actions each year are measured against three objectives — profitable growth, achieving and maintaining best-in-class margins and a superior return on capital as an investment grade company.

“It is important to understand that not everything starts to deliver at once,” Mr. Hees said. “In some cases, like revenue management, it’s a project. You must build an internal capability before you can achieve sustainable results and returns.”

In questions and answers during the call, Kraft Heinz executives were asked whether the higher net pricing would continue into 2016.

“We are very pleased with the work we did on P.N.O.C. (prices net of costs),” said Georges Zoghbi, chief operating officer of the Kraft Heinz U.S. Commercial business. “And not just in Q4 or the last two quarters that you have mentioned but right throughout 2015, particularly in dairy, in meat, in coffee. And we believe the strength of our brand equities and the investment that we have been making and we continue to make in these brands is allowing us to do that.

“Do we feel this is sustainable? Yes, we do. And the reason we feel it’s sustainable is because while we are doing this and the P.N.O.C. is healthy and positive for us, if you look at the market share, which you have access to, we managed to grow share in all these categories. For example, we grew share in cream cheese. We grew share in processed. We grew share in American slices. We grew share in Oscar Mayer beef combos. We grew share in snack nuts and seed. We grew share in coffee.”

In the case of dairy and hot dogs, Mr. Zoghbi acknowledged that the company surrendered share. He attributed the losses to the company’s “willingness not to chase the market down.”

Asked later in the call about the sustainability of the improved net pricing, Mr. Zoghbi expanded.

“The reason we believe it’s sustainable, is because of the investment in our brands, the investment in innovation, and the investment in renovation that we are making to be able to command a premium for the product,” he said. “That will continue in the current year as well. And as you know, the U.S. is the majority of the revenue of the worldwide market.”

Also factoring into the share price strength was mounting investor confidence that the integration of Kraft into Heinz was moving forward successfully. One analyst specifically asked about the integration of Heinz into the Kraft Kitchens web site.

“As you know, Kraft Kitchens is the largest web site for downloading recipes not just in the United States but in the world,” Mr. Zoghbi said. “And absolutely, we are already in motion to include all the Heinz products on it, and we are doing more in that in terms of digital database that we capture from visitors to this site that we can start forming a primary database to use for our own marketing directly to the consumers.”