On Wednesday, Citi adjusted its outlook on Kraft Heinz Company (NASDAQ:KHC), reducing the price target to $38 from the previous $42, while still holding a Buy rating on the shares.
The revision comes ahead of the company's expected second-quarter fiscal year 2024 report on July 31st. Citi anticipates that both sales and earnings per share (EPS) for the quarter may fall short of market expectations and that the company's full-year guidance for these metrics might be lowered. This projection aligns with Kraft Heinz's performance in recent measured channels and comments made at an investor conference last month.
Despite these near-term concerns, Citi remains positive about the long-term prospects for Kraft Heinz's stock. The firm's analysis suggests that the anticipated challenges, including potential shortfalls in sales and EPS, are unlikely to take the market by surprise. The company's upcoming earnings report is being closely watched by investors, given the signals of weakness that have already been observed.
Kraft Heinz's management has previously acknowledged the difficulties they are encountering, which include a less favorable takeaway in certain sales channels. These challenges have been factored into Citi's revised estimates, which now sit below the company's current guidance ranges.
In summary, while Citi has lowered the price target for Kraft Heinz to $38, the firm maintains a Buy rating on the stock. The upcoming fiscal second-quarter results will provide further clarity on the company's performance and its outlook for the year.
In other recent news, Kraft Heinz Company has been the focus of several major developments. Jefferies has reduced its price target for Kraft Heinz shares from $35 to $34, maintaining a Hold rating. The firm has revised its growth and earnings per share estimates for the company due to a decline in retail sales across several brands, including Lunchables, Kraft, and Oscar Mayer.
Meanwhile, Piper Sandler has upgraded Kraft Heinz from Neutral to Overweight, setting a new price target at $42.00. The firm attributes this to an improved outlook in the company's Foodservice segment, which accounts for approximately 14% of sales and is expected to see accelerated growth in 2025.
Kraft Heinz is also considering selling its Oscar Mayer brand, a move that could value the meat business at $3 billion to $5 billion. This comes in response to a decrease in consumer interest in products like hot dogs and bacon, as preferences shift towards healthier food options. Bank of America (NYSE:BAC) and Centerview Partners have been enlisted to find potential buyers.
Lastly, during the latest earnings call, Kraft Heinz outlined its strategy to cater to a diverse consumer base amid challenging economic conditions. The company intends to generate an additional $2 billion in net sales through innovation, focusing on core brand renovations, product expansion, and increased marketing investments.
Despite inflationary pressures and a temporary plant shutdown, Kraft Heinz remains optimistic about achieving mid-single-digit organic growth for the year.
InvestingPro Insights
As Kraft Heinz Company (NASDAQ:KHC) approaches its second-quarter earnings report, InvestingPro data provides a snapshot of the company's current financial metrics. With a market cap of $39.88 billion and a P/E ratio of 14.27, Kraft Heinz is trading at a low earnings multiple, which could indicate a potentially undervalued stock in relation to its near-term earnings growth. The PEG ratio, at 0.83, suggests that the stock may also be undervalued based on its earnings growth rate.
InvestingPro Tips reveal that while analysts have revised their earnings expectations downwards for the upcoming period, they still predict the company will be profitable this year, having been profitable over the last twelve months. Additionally, Kraft Heinz is trading at a low P/E ratio relative to near-term earnings growth, which may appeal to value-oriented investors.
For those interested in a deeper analysis, InvestingPro offers additional tips on Kraft Heinz, which can be accessed at: https://www.investing.com/pro/KHC. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and explore the full range of insights available on InvestingPro.
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