In the financial context, Kraft Heinz Company (KHC) has been experiencing an upward trend in its net income over the past three years. This positive trajectory comes after a challenging period in 2020, characterized by a severe recession caused by the COVID-19 pandemic and various factors that led to a decline in revenue.

General Mills exhibits a more consistent and stable trajectory in its net income when compared to KHC. This steady growth in General Mills' net income is generally considered favorable, as it suggests reliability and financial predictability. In contrast, KHC's net income displays more abrupt and unpredictable fluctuations, which can often be perceived as a less positive sign and may indicate financial instability.

In Kraft Heinz's financials, it's evident that a substantial portion of their expenses is attributed to selling and administration costs, comprising over 10-12% of their total revenue. This is where the majority of their expenditure is directed. Later, we'll compare this figure to a key competitor in the same industry to assess its competitiveness.

Another notable expense category is research and development, although it represents a relatively small percentage of their revenue. Given KHC's status as a multinational corporation, they must also account for gains and losses arising from currency exchange. This is due to the fact that conducting business in different currencies can lead to fluctuations in currency values. The figure below illustrates that they experience both gains and losses in various years. While the percentage may not be exceptionally high, it's an important factor to consider.

Lastly, there's the category of other non-operating income and expenses, which also contributes only minimally to the total percentage of revenue.

When examining the expenses of one of Kraft Heinz's key competitors, General Mills, a peculiar trend becomes apparent. Over the last five years, General Mills has primarily focused on just three main expense categories, with all other categories marked as "NA," indicating they haven't allocated spending in those areas. Notably, a significant portion of their expenses is directed toward Selling, General, and Administrative (SGA) expenses, consuming a relatively higher percentage of their revenue.

It's important to highlight that, despite the marginal difference in revenue between KHC and General Mills, KHC manages to keep a lower percentage of their revenue devoted to expenses. This is a positive indicator for KHC, signifying that their SGA expenses are more efficiently managed than those of one of their primary competitors. This, in turn, reflects positively on KHC's management team, particularly in the realm of sales and administrative expense control, demonstrating their effectiveness in maintaining a healthy expense structure.

Kraft Heinz Company (KHC) is facing a significant problem with the quality of its earnings. In simple terms, this means that the reliability and sustainability of the profits they report are in a bad state. The average Quality of Earnings (QoE) for KHC is 3.84, but there's a huge exception: three years ago, the QoE spiked to 9.97, making the overall average look better than it really is. To get a more accurate picture, we should consider the median QoE over the last five years, which is 2.26.

However, the troubling part is that KHC's QoE is currently on a downward trend. Last year, they reported a QoE of about 0.78, which is remarkably low for a company of their size. This suggests that their reported profits may not truly represent the actual financial health of the company. Analysts pay close attention to the QoE to understand a company's true financial situation and to detect any potential accounting tricks.

Now, let's look at General Mills, a company with an even lower QoE, averaging at 1.37, and a median of 1.27. However, when we dive deeper into the numbers, we see that General Mills' QoE is more consistent and stable compared to KHC. This indicates that General Mills might have a more honest and predictable way of accounting for their earnings, with less manipulation.

In a nutshell, KHC might initially seem to have a higher QoE, but the trend shows inconsistency and a recent decline, which raises doubts about the reliability of their earnings. On the other hand, General Mills has a lower QoE on average but maintains a stable and dependable QoE over time. Consistency in QoE is generally preferred because it implies more reliable financial reporting.