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The Kraft Heinz Co KHC

Morningstar Rating
$35.31 −0.23 (0.65%)
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Company Report

Kraft Heinz Earnings: Sales Stifled by Pinched Consumer, but Investments to Buoy Long-Term Results

The market soured on no-moat Kraft Heinz following mixed fourth-quarter marks, sending shares down by a mid-single-digit percentage. While its adjusted gross margin popped 260 basis points to 34.8%, organic sales slipped 0.7% on a 4.4% degradation in volume. This shortfall was particularly acute on its home turf (around three quarters of its total sales), where organic sales fell 3% on a 5.5% downdraft in volumes. Beyond a few one-time factors (related to trade timing and retail inventories, which compressed sales by 150 basis points), management was also forthright that consumers are struggling under the weight of higher interest rates and a reduction in SNAP benefits.

Price vs Fair Value

KHC is trading at a 33% discount.
Price
$35.54
Fair Value
$61.00
Uncertainty
Medium
1-Star Price
$68.53
5-Star Price
$96.10
Economic Moat
Mtlh
Capital Allocation
Djrmrwrm

Bulls Say, Bears Say

Bulls

Tempered exposure to private label (11% now versus 17% in 2019) and enhanced agility in responding to consumer trends should negate any lasting downdraft in Kraft Heinz's volume.

Bears

Inflation (stemming from commodities, labor, packaging, and logistics) has yet to abate, and it's possible Kraft Heinz will eventually struggle to pass the hit on to consumers without a more pronounced contraction in volume.

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News

Trading Information

Previous Close Price
$35.54
Day Range
$35.3135.69
52-Week Range
$30.6941.44
Bid/Ask
$35.30 / $35.31
Market Cap
$42.87 Bil
Volume/Avg
2.0 Mil / 8.5 Mil

Key Statistics

Price/Earnings (Normalized)
11.97
Price/Sales
1.65
Dividend Yield (Trailing)
4.50%
Dividend Yield (Forward)
4.50%
Total Yield
5.56%

Company Profile

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. While the retail channel drives around 85% of its total sales, the firm operates a growing presence in the foodservice arena. Outside North America, Kraft Heinz's global reach counts a distribution network in Europe and emerging markets that drives 20%-25% of its consolidated sales base, as its products are sold in more than 190 countries and territories.
Sector
Consumer Defensive
Industry
Packaged Foods
Stock Style Box
Mid Value
Total Number of Employees
36,000

Competitors

Valuation

Metric
KHC
NSRGY
GIS
Price/Earnings (Normalized)
11.9720.0414.52
Price/Book Value
0.876.463.90
Price/Sales
1.652.681.89
Price/Cash Flow
9.1816.4011.82
Price/Earnings
KHC
NSRGY
GIS

Financial Strength

Metric
KHC
NSRGY
GIS
Quick Ratio
0.440.490.30
Current Ratio
0.990.830.64
Interest Coverage
4.948.567.71
Quick Ratio
KHC
NSRGY
GIS

Profitability

Metric
KHC
NSRGY
GIS
Return on Assets (Normalized)
4.06%10.01%8.39%
Return on Equity (Normalized)
7.46%34.58%26.03%
Return on Invested Capital (Normalized)
6.27%14.97%13.30%
Return on Assets
KHC
NSRGY
GIS
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