Kraft Heinz Stock Gets Upgraded Twice

Two analysts are feeling optimistic about the future of Kraft Heinz.

he food company just got upgraded by CFRA and Guggenheim after its investor day.

CFRA raised Kraft Heinz’s rating to buy from hold, and increased its 12-month target to $37 from $35.

“We left the meeting with a clearer picture and more confidence that Kraft Heinz can once again return to sustainable earnings growth,” wrote Arun Sundaram, analyst at CFRA Research.
Guggenheim upgraded Kraft Heinz to neutral from sell and increased its price target to $34 from $30. According to analysts at the firm, they are optimistic about the future of the company under Chief Executive Miguel Patricio, who took on the role in July 2019.

“Moving from a short-term, cost-cutting centric company to a consumer-focused, longer-term growth mandate, it’s clear that much work has been done in the past few months – all while coping with the increased demands associated with the COVID-19 pandemic,” analysts led by Laurent Grandet wrote.
Guggenheim said it couldn’t be “more constructive” because of the risks of executing a new plan and the need to off-load additional businesses that are underperforming.

The company had said that it expects to cut $2 billion in costs over the next five years, which will help generate 4% to 6% adjusted earnings per share growth.

Kraft also said that it would sell some of its cheese business to France-based Groupe Lactalis for $3.2 billion. Brands like Kraft Singles, Velveeta, Philadelphia and the company’s iconic macaroni and cheese will remain part of the Kraft Heinz lineup.

“For each generation, what are the new needs?” the company’s U.S business lead Abrams-Rivera asked.

“Families are adopting food behaviors based on food moments in their lives. A whole generation is defined by the experience during the pandemic.”

Engaging with customers is part of the company’s strategy, Abrams-Rivera told MarketWatch.
“Companies that do well will have an understanding and foresight about how consumers are going to evolve,” he said.
During the investor conference, CEO Patricio said e-commerce is a $1 billion-plus business for Kraft Heinz and is growing by more than 100%.

“We have 97% penetration,” said CEO Patricio. “That means that 97% of the households in America have Kraft Heinz products in them.”

Stifel has also chimed in and said, “We find a company with a new strategy for its business that is already in motion, roughly nine months, and therefore perhaps further along and more developed than investors might realize.”

According to the firm, the pandemic has accelerated the company’s transformation.

“In addition, with such strong cash flow, we are seeing a faster reduction in its debt load, while preserving its dividend, which could reduce its risk profile,” the note reads.

Stifel rates Kraft Heinz stock hold with a $36 price target.
Disclaimer: We have no position in Kraft Heinz Co. (NASDAQ: KHC) and have not been compensated for this article.