Briefing From The Editor -- KHC Stock

Kraft Heinz logged a -2.1% change during today's afternoon session, and is now trading at a price of $36.99 per share.

Over the last year, Kraft Heinz logged a 1.0% change, with its stock price reaching a high of $42.8 and a low of $32.73. Over the same period, the stock underperformed the S&P 500 index by -3.0%. As of April 2023, the company's 50-day average price was $39.23. The Kraft Heinz Company, together with its subsidiaries, manufactures and markets food and beverage products in the United States, Canada, the United Kingdom, and internationally. Based in Pittsburgh, PA, the large-cap Consumer Staples company has 37,000 full time employees. Kraft Heinz has offered a 4.2% dividend yield over the last 12 months.

Exceptional Profitability Overshadowed by Excessive Leverage:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (MM) $24,977 $26,185 $26,042 $26,485
Gross Margins 32.6% 35.0% 33.3% 30.7%
Operating Margins 19.9% 21.1% 19.6% 17.2%
Net Margins 7.75% 1.36% 3.89% 8.92%
Net Income (MM) $1,935 $356 $1,012 $2,363
Net Interest Income -$1,361,000 -$1,394,000 -$2,047,000 -$921,000
Depreciation & Amort. -$994,000 -$969,000 -$910,000 -$933,000
Earnings Per Share $1.58 $0.29 $0.82 $1.98
EPS Growth n/a -81.65% 182.76% 141.46%
Diluted Shares (MM) 1,224 1,228 1,236 1,227
Free Cash Flow (MM) $2,784 $4,333 $4,459 $1,553
Capital Expenditures (MM) -$768 -$596 -$905 -$916
Net Current Assets (MM) -$41,604 -$38,765 -$34,948 -$33,746
Current Ratio 1.03 1.34 0.99 0.87
Long Term Debt (MM) $28,216 $28,070 $21,061 $19,233
Net Debt / EBITDA 5.37 7.35 3.95 3.95

Kraft Heinz benefits from stable revenues and increasing reinvestment in the business, strong margins with a stable trend, and wider gross margins than its peer group. The company's financial statements show positive EPS growth and consistent free cash flow. However, the firm has a highly leveraged balance sheet.

An Exceptionally Low P/B ratio but Trades Above Its Graham Number:

Kraft Heinz has a trailing twelve month P/E ratio of 19.8, compared to an average of 24.36 for the Consumer Staples sector. Based on its EPS guidance of $3.03, the company has a forward P/E ratio of 12.9. According to the 13.9% compound average growth rate of Kraft Heinz's historical and projected earnings per share, the company's PEG ratio is 1.42. Taking the weighted average of the company's EPS CAGR and the broader market's 5-year projected EPS growth rate, we obtain a normalized growth rate of 9.4%. On this basis, the company's PEG ratio is 2.11. This suggests that these shares are overvalued. In contrast, the market is likely undervaluing Kraft Heinz in terms of its equity because its P/B ratio is 0.92 while the sector average is 4.29. The company's shares are currently trading 13.9% above their Graham number.

There's an Analyst Consensus of Some Upside Potential for Kraft Heinz:

The 18 analysts following Kraft Heinz have set target prices ranging from $37.5 to $50.0 per share, for an average of $45.25 with a hold rating. As of April 2023, the company is trading -13.3% away from its average target price, indicating that there is an analyst consensus of some upside potential.

Kraft Heinz has a very low short interest because 1.3% of the company's shares are sold short. Institutions own 81.8% of the company's shares, and the insider ownership rate stands at 1.39%, suggesting a large amount of insider shareholders. The largest shareholder is Berkshire Hathaway, Inc, whose 27% stake in the company is worth $12,046,859,744.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.