Chicago-based Kraft Heinz Company (KHC - Get Rating) manufactures and markets food and beverage products. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products. The company also offers dressings, healthy snacks, and other categories, spices, and other seasonings. KHC’s four-year average dividend yield is 5%, and its current dividend translates to a 3.6% yield. It declared a $0.40 per share quarterly dividend to be paid on June 24, 2022. The stock has gained 22.7% in price year-to-date and 20.3% over the past three months to close the last trading session at $44.08.
On May 10, 2022, KHC announced that it would develop a paper-based, renewable, and recyclable bottle with Pulpex by using 100% sustainably sourced wood pulp. The partnership aligns well with KHC’s sustainable packaging ambitions, and it fits well with making all packaging globally recyclable, reusable, or compostable by 2025. It will also help it achieve net-zero greenhouse gas emissions by 2050.
KHC CEO Miguel Patricio said, “We still have work to do, more opportunity ahead, and we remain confident in our ability to deliver our plan for the year and our long-term growth strategy.” However, the company’s free cash flow during the first quarter declined 53.3% year-over-year to $272 million. The decline in its free cash flow may hamper the company’s growth prospects.
Here is what could influence KHC’s performance in the upcoming months:
Mixed Financials
KHC’s net sales declined 5.5% year-over-year to $6.04 billion for the first quarter, ended March 26, 2022. The company’s net income increased 37.5% year-over-year to $781 million. Also, its adjusted EBITDA declined 15.1% year-over-year to $1.34 billion. In addition, its adjusted EPS came in at $0.60, representing a 16.7% decrease year-over-year.
Stretched Valuation
In terms of forward EV/S, KHC’s 2.87x is 59.7% higher than the 1.80x industry average. And its 12.41x forward EV/EBITDA is 1.6% higher than the 12.20x industry average. And the stock’s 2.11x forward P/S is 76.7% higher than the 1.19x industry average.
Unfavorable Analyst Estimates
Analysts expect KHC’s EPS for the quarter ending June 30, 2022, to decrease 12.8% year-over-year to $0.68. Its revenue for fiscal 2022 is expected to decline 1.6% year-over-year to $25.62 billion. And its EPS is expected to decrease 1.5% per annum over the next five years.
Mixed Profitability
KHC’s trailing-12-month gross profit margin and net profit margin of 33.05% and 4.77%, respectively, are lower than the 34.63% and 5.32% industry average. And its 1.31% trailing-12-month ROA is 72.4% lower than the 4.74% industry average. Furthermore, the stock’s trailing-12-month 0.27% asset turnover ratio is lower than the 0.87% industry average. In addition, its trailing-12-month EBIT margin and EBITDA margin of 20.35% and 23.89%, respectively, are 138.1% and 96.7% higher than the 8.55% and 12.14% industry averages.
POWR Ratings Reflect Uncertainty
KHC has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. KHC has a C grade for Value, which is in sync with its 2.87x forward EV/S, which is 59.7% higher than the 1.80x industry average.
KHC has a C grade for Growth, consistent with analyst expectations that its EPS for fiscal 2022 will decrease 1.6% year-over-year to $25.62 billion.
KHC is ranked #42 among 87 stocks in the Food Makers industry. Click here to access KHC’s ratings for Momentum, Stability, Sentiment, and Quality.
Bottom Line
KHC’s dividend history makes it an attractive stock for investors looking to generate a steady income stream amid current market volatility. However, analysts expect its revenues to decline in fiscal 2022. Furthermore, it is currently trading at a higher valuation than its peers. So, we think it could be wise to wait for a better entry point in the stock.
How Does the Kraft Heinz Company (KHC) Stack Up Against Its Peers?
While KHC has an overall POWR Rating of C, one might want to consider investing in the following Food Makers stocks with an A (Strong Buy) and B (Buy) rating: Grupo Bimbo, S.A.B. de C.V. (GRBMF - Get Rating), Ajinomoto Co., Inc. (AJINY - Get Rating), and Marfrig Global Foods S.A. (MRRTY - Get Rating).
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KHC shares were trading at $43.08 per share on Tuesday morning, down $1.00 (-2.27%). Year-to-date, KHC has gained 21.27%, versus a -14.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
More Resources for the Stocks in this Article
| Ticker | POWR Rating | Industry Rank | Rank in Industry |
| KHC | Get Rating | Get Rating | Get Rating |
| GRBMF | Get Rating | Get Rating | Get Rating |
| AJINY | Get Rating | Get Rating | Get Rating |
| MRRTY | Get Rating | Get Rating | Get Rating |
