Kraft Heinz Further ‘Underperformance Seems Unlikely’
2022.07.28 18:33
Kraft Heinz (KHC) Further ‘Underperformance Seems Unlikely’
By Sam Boughedda
Kraft Heinz (NASDAQ:KHC) reported results Wednesday, topping earnings and revenue expectations, but its share price closed the session 5.95% lower.
However, analysts at Stifel and Goldman Sachs upgraded the stock, with one stating that further underperformance seems unlikely.
A Goldman Sachs analyst said in a note to investors that following the results, they were surprised the stock sold off and are using the opportunity to upgrade Kraft Heinz to Neutral from Sell, maintaining a $37 per share price target.
“Since we downgraded the stock to Sell the company there have been a number of important changes. First and foremost the company has successfully divested two large businesses at higher multiples than we would have expected which has resulted in both a higher quality level for its overall portfolio (less commodity sensitivity & private label exposure) and lower leverage ratio (now 3.4X vs. 4.7X three years ago). Secondly, expectations have been reset lower and we no longer see downside to consensus EPS. And lastly, relative valuation has become more compelling,” said the analyst.
Meanwhile, a Stifel analyst upgraded the shares of Kraft Heinz to Buy from Hold, maintaining a $43 target price. The analyst said their price target represents a strong upside for the shares from current levels.
“We are taking advantage of some near-term dislocation in the stock and a discount valuation (15% discount to its peers), against the backdrop of a solid and improving operating environment for the business. We see the combination of strong pricing taking hold, the potential for less negative elasticity levels, some relief in the input cost environment, and continued robust International growth as keys to driving the shares higher,” wrote the analyst.
