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Kraft Heinz (KHC) Trading Near 52-Week Low: Buy, Hold or Sell?
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The Kraft Heinz Company (KHC - Free Report) has not been in its best shape lately as it navigates the pressures of a difficult consumer environment and underlying commodity cost inflation. This food and beverage giant has seen its shares slide 10.7% in the past three months. Finishing the last trading session at $32.07, the stock stands perilously close to its 52-week low of $30.68 and 17.7% below its 52-week high of $38.96.
Image Source: Zacks Investment Research
Additionally, this Pittsburgh, PA-based company’s stock has slipped below critical technical thresholds, such as its 50-day and 200-day moving averages, which are important indicators for gauging market trends and momentum. These raise investor concerns regarding KHC’s ability to navigate current market dynamics.
Image Source: Zacks Investment Research
Kraft Heinz appears overvalued from the price-to-sales perspective. The stock is currently trading at a forward 12-month P/S ratio of 1.45, exceeding the industry average of 1.33. This premium valuation raises concerns about the stock’s sustainability, signaling the potential for further downside.
Image Source: Zacks Investment Research
While Kraft Heinz remains committed to weathering the storm with its strong brand portfolio, cost management initiatives and focus on innovation, is a potential recovery really possible in the near term? Let’s decode.
Troubles Brewing for KHC
Like other food companies such as Campbell Soup (CPB - Free Report) , General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) , Kraft Heinz also remains affected by a dynamic macroeconomic scenario. The company is witnessing volatile consumer behaviors, especially among lower-income segments.
High interest rates and decreasing savings have been posing challenges for lower-income consumers. Apart from this, a reduction in the Supplemental Nutrition Assistance Program benefits is affecting consumers’ purchasing power. Kraft Heinz, which heavily relies on sales from middle and lower-income households, is particularly vulnerable to these changes, potentially leading to decreased sales volumes.
These economic constraints have caused consumers to pull back on spending at restaurants and convenience stores and instead prepare meals at home. As a result, there has been a decline in restaurant traffic in the United States, which has been weighing on Kraft Heinz’s Away from Home business. As this sector is significant for Kraft Heinz, reduced demand here has been further straining overall sales. We note that the company's first-quarter 2024 sales decline of 1.2% highlights many of these problems.
Apart from this, higher costs for raw materials, packaging and logistics make it difficult for Kraft Heinz to maintain profitability, especially when passing these costs onto consumers is a challenge. Additionally, the company is stepping up marketing investments, which could escalate operating expenses.
Analyst Sentiment Weakens
Kraft Heinz is walking a tight rope. The Zacks Consensus Estimate for the current and next fiscal year earnings per share has moved downward by a cent each to $3.01 and $3.17, respectively, over the past seven days. This downward adjustment, although small, reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Image Source: Zacks Investment Research
Can KHC Overcome Current Challenges?
Recognizing the economic pressures on lower-income households, Kraft Heinz is catering to this segment by offering value-oriented products that enable them to prepare affordable meals at home. For higher-income consumers who are increasing their spending on travel and hospitality, Kraft Heinz is providing premium products that meet their expectations for quality and culinary experiences.
The company continues to renovate its core brands to stay relevant and tempting to the modern consumer. This involves updating product offerings and enhancing brand value to meet evolving preferences. Kraft Heinz is also focused on introducing innovative food solutions, with a goal to generate additional net sales worth $2 billion from innovation.
Kraft Heinz’s determined efforts to enhance performance are also complimented by its Accelerate Platform, which focuses on high-potential categories and brands. These include mac & cheese innovations (including gluten-free options and new flavors), condiments expansion and exiting non-strategic businesses like Heinz bulk vinegar to focus on more profitable areas.
By focusing on these strategic initiatives, Kraft Heinz aims to strengthen its market position, drive growth and continue to meet the diverse needs of its consumers, ensuring the company remains a trusted and iconic brand globally. Additionally, KHC remains focused on cost management and strategic pricing to offset the inflationary pressures.
What Should be Your Approach?
Investors face a pivotal decision regarding Kraft Heinz's prospects. Despite the company's strategic initiatives aimed at revitalizing growth, such as expanding its product portfolio and concentrating on areas with greater potential, the stock still remains in the trouble spot. Challenges like higher input costs and shifting consumer preferences continue to pose significant hurdles. Given the recent stock performance and valuation concerns, investors might consider looking for greener pastures. Kraft Heinz currently carries a Zacks Rank #4 (Sell).
Image: Bigstock
Kraft Heinz (KHC) Trading Near 52-Week Low: Buy, Hold or Sell?
The Kraft Heinz Company (KHC - Free Report) has not been in its best shape lately as it navigates the pressures of a difficult consumer environment and underlying commodity cost inflation. This food and beverage giant has seen its shares slide 10.7% in the past three months. Finishing the last trading session at $32.07, the stock stands perilously close to its 52-week low of $30.68 and 17.7% below its 52-week high of $38.96.
Image Source: Zacks Investment Research
Additionally, this Pittsburgh, PA-based company’s stock has slipped below critical technical thresholds, such as its 50-day and 200-day moving averages, which are important indicators for gauging market trends and momentum. These raise investor concerns regarding KHC’s ability to navigate current market dynamics.
Image Source: Zacks Investment Research
Kraft Heinz appears overvalued from the price-to-sales perspective. The stock is currently trading at a forward 12-month P/S ratio of 1.45, exceeding the industry average of 1.33. This premium valuation raises concerns about the stock’s sustainability, signaling the potential for further downside.
Image Source: Zacks Investment Research
While Kraft Heinz remains committed to weathering the storm with its strong brand portfolio, cost management initiatives and focus on innovation, is a potential recovery really possible in the near term? Let’s decode.
Troubles Brewing for KHC
Like other food companies such as Campbell Soup (CPB - Free Report) , General Mills (GIS - Free Report) and Conagra Brands (CAG - Free Report) , Kraft Heinz also remains affected by a dynamic macroeconomic scenario. The company is witnessing volatile consumer behaviors, especially among lower-income segments.
High interest rates and decreasing savings have been posing challenges for lower-income consumers. Apart from this, a reduction in the Supplemental Nutrition Assistance Program benefits is affecting consumers’ purchasing power. Kraft Heinz, which heavily relies on sales from middle and lower-income households, is particularly vulnerable to these changes, potentially leading to decreased sales volumes.
These economic constraints have caused consumers to pull back on spending at restaurants and convenience stores and instead prepare meals at home. As a result, there has been a decline in restaurant traffic in the United States, which has been weighing on Kraft Heinz’s Away from Home business. As this sector is significant for Kraft Heinz, reduced demand here has been further straining overall sales. We note that the company's first-quarter 2024 sales decline of 1.2% highlights many of these problems.
Apart from this, higher costs for raw materials, packaging and logistics make it difficult for Kraft Heinz to maintain profitability, especially when passing these costs onto consumers is a challenge. Additionally, the company is stepping up marketing investments, which could escalate operating expenses.
Analyst Sentiment Weakens
Kraft Heinz is walking a tight rope. The Zacks Consensus Estimate for the current and next fiscal year earnings per share has moved downward by a cent each to $3.01 and $3.17, respectively, over the past seven days. This downward adjustment, although small, reflects a negative sentiment among analysts and suggests potential challenges in achieving projected profitability.
Image Source: Zacks Investment Research
Can KHC Overcome Current Challenges?
Recognizing the economic pressures on lower-income households, Kraft Heinz is catering to this segment by offering value-oriented products that enable them to prepare affordable meals at home. For higher-income consumers who are increasing their spending on travel and hospitality, Kraft Heinz is providing premium products that meet their expectations for quality and culinary experiences.
The company continues to renovate its core brands to stay relevant and tempting to the modern consumer. This involves updating product offerings and enhancing brand value to meet evolving preferences. Kraft Heinz is also focused on introducing innovative food solutions, with a goal to generate additional net sales worth $2 billion from innovation.
Kraft Heinz’s determined efforts to enhance performance are also complimented by its Accelerate Platform, which focuses on high-potential categories and brands. These include mac & cheese innovations (including gluten-free options and new flavors), condiments expansion and exiting non-strategic businesses like Heinz bulk vinegar to focus on more profitable areas.
By focusing on these strategic initiatives, Kraft Heinz aims to strengthen its market position, drive growth and continue to meet the diverse needs of its consumers, ensuring the company remains a trusted and iconic brand globally. Additionally, KHC remains focused on cost management and strategic pricing to offset the inflationary pressures.
What Should be Your Approach?
Investors face a pivotal decision regarding Kraft Heinz's prospects. Despite the company's strategic initiatives aimed at revitalizing growth, such as expanding its product portfolio and concentrating on areas with greater potential, the stock still remains in the trouble spot. Challenges like higher input costs and shifting consumer preferences continue to pose significant hurdles. Given the recent stock performance and valuation concerns, investors might consider looking for greener pastures. Kraft Heinz currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.