As investors, consumers and grocers alike worry about the impact of private label products and razor-thin grocery margins, Kraft Heinz Co. (KHC)  won't settle the argument: the Pittsburgh- and Chicago-based food conglomerate reported mixed third-quarter earnings. 

During the quarter ending Sept. 30, Kraft Heinz sales rose 0.7% year over year to $6.31 billion, shy of the consensus estimate of $6.32 billion, according to FactSet estimates. Earnings of 83 cents per share exceeded analysts' expected 82 cents per share. 

The results were in-line with expectations, as analysts expected the quarter to be a bit painful thanks to declining sales in certain core product groups.

"Major categories including processed cheese, lunchmeat, nuts and cream cheese are experiencing continued sales loss due to both market share loss and category weakness," wrote Bernstein analyst Alexia Howard, citing her analysis of Nielsen scanner data. Management "seems positive" about online sales, which aren't tracked by Nielsen. Although the e-commerce segment "only represented ~1% of its US retail sales, it saw more than 60% growth in 2Q this year," she wrote, which could mean long-term growth that could balance poor sales growth.

Kraft Heinz shares are down about 12% over the last three months, Susquehanna analyst Pablo Zuanic noted, underperforming most of its peers in the consumer packaged goods space. Exceptions are J.M. Smucker Co. (SJM) , Hain Celestial Group Inc. (HAIN) and TreeHouse Foods Inc. (THS) , which have fallen about 15%, 18% and 20%, respectively.

"Underlying this pullback is the overall negative sentiment surrounding retail grocery (pricing pressure and private label/hard discounter focus), as well as little in the way of deal chatter," Zuanic wrote. Those pressures are likely to increase further thanks to compressed grocery margins, the fact that Amazon.com Inc. (AMZN) and Walmart Stores Inc. (WMT) both expanding their private label businesses and the move from German low-cost grocers Aldi and Lidl to expand their U.S. presences.

Kraft Heinz, renowned for its ability to slash costs at newly-acquired companies, offered $143 billion for Unilever NV (UN) in February, with the six-month hiatus required under British takeover law expiring in August. Since abandoning the approach, Kraft Heinz has not updated investors on a potential new deal, which Zuanic believes is likely. He predicted a $200 billion deal, with equity investments by private equity firm 3G Capital and Berkshire Hathaway Inc. (BRK.B) . The two firms orchestrated Kraft Foods and Heinz and together hold a 50.59% stake in Kraft Heinz.

Berkshire's Warren Buffett recently ruled out an acquisition of Mondelez International Inc. (MDLZ) , which used to be Kraft's snack business. Even if Mondelez isn't an option, thanks to its "lackluster Ebitda trends," Zuanic added that he is "really thinking KHC needs a new deal."

Kraft Heinz shares are down 11% year to date, while the S&P gained 15% during that period. Shares fell 2.5% to $75.75 in after-hours trading.

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