Kraft Heinz’s Growth Potential Is ‘Undervalued,’ Analyst Says. He’s Bullish on the Stock.

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Bags of Kraft cheese are seen on display in New York City.

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With the S&P 500 suffering double digit losses this year, Kraft Heinz has easily risen above the fray, and is up ahead of the broader market again Monday. Expect that to continue, said Mizuho.

Analyst John Baumgartner initiated coverage of Kraft Heinz (ticker: KHC) with a Buy Rating and price target of $48, writing that “the Street continues to underestimate (and undervalue) growth potential.”

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He argued that despite concerns about Kraft’s portfolio of branded food products, recent data show that categories that account for roughly half of the company’s revenue skew toward the highest earnings households, as well as those under 35. Or put another way, that means demand could stay resilient for its products thanks to its wealthier customer base, even as consumer spending decelerates overall. Younger health-conscious consumers also aren’t turning away from these brands.

Of course, packaged food stocks all got a boost during the pandemic, when people ate more at home and remained remarkably loyal to brands. Yet Baumgartner argued this isn’t a case of the rising tide lifting all boats. Instead he said, “Since 2020, foundational improvements have been masked by Covid tailwinds.”

Kraft needed plenty of improvements prependemic, given major issues at the company spanning a government probe and dividend cut, revealed in early 2019. Yet with new leadership the company has come a long way, including a beat-and-raise quarter in late April, its eighth straight quarter of exceeding earnings expectations.

Data from FactSet show that analysts have been tweaking their estimates higher over the past week for the current quarter and full year. That said, even though some analysts have been joining Baumgartner in getting more bullish on the stock, it remains out of favor on Wall Street, with just five out of the 22 analysts rating it at Buy or the equivalent.

Kraft shares were climbing 1.3% to $38.50, with the stock up more than 7% in 2022.

Write to Teresa Rivas at [email protected]

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Credit: www.marketwatch.com /

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