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The Kraft Heinz Co Stock Quote KHC

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Morningstar's The Kraft Heinz Co Stock Analysis

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Is it the right time to buy or sell?

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Kraft Heinz Shares' Rout Unjustified Despite Inflation's Recent Toll

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

The market sent no-moat Kraft Heinz's shares down roughly 8% following second-quarter results, reflecting the negative effects of inflation, but we believe this reaction is shortsighted, leaving investors an opportunity to stock up at a 30% discount. Organic sales growth accelerated (to 10.1%, an improvement from 6.8% in the first quarter), though the burden from commodity and supply chain costs also swelled, driving a 270-basis-point erosion in adjusted operating margin to 19.7%. It’s unlikely these cost headwinds will abate in the near term, with management now expecting a high-teens percentage impact in fiscal 2022, up from the midteens three months ago. But in our view, Kraft Heinz is employing multiple tactics—such as surgically raising prices, extracting inefficiencies with the aim to realize $400 million in savings this year, and revenue growth management—that will blunt the hit to profits longer term.

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Key Statistics - KHC

Company Profile - KHC

Business Description

In July 2015, Kraft merged with Heinz to create the third-largest food and beverage manufacturer in North America behind PepsiCo and Nestle and the fifth-largest player in the world. Beyond its namesake brands, the combined firm's portfolio includes Oscar Mayer, Velveeta, and Philadelphia. Outside North America, the firm's global reach includes a distribution network in Europe and emerging markets that drive around one fifth of its consolidated sales base, as its products are sold in more than 190 countries and territories.

One PPG Place
Pittsburgh, PA, 15222
T +1 412 456-5700
Industry Packaged Foods
Most Recent Earnings Jun 30, 2022
Fiscal Year End Dec 25, 2022
Stock Type Slow Growth
Employees 36,000

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