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On Wednesday, CFRA analyst Arun Sundaram announced a reduction in the 12-month price target for Kraft Heinz Company (NASDAQ:KHC) shares, bringing it down to $32 from the previous $41, while maintaining a Buy rating on the stock. According to InvestingPro data, the stock appears undervalued with a GOOD overall Financial Health score, despite six analysts recently revising their earnings expectations downward. The adjustment follows the release of the company’s fourth-quarter earnings, which, despite an 8% year-over-year increase in adjusted earnings per share (EPS) to $0.84, outperforming estimates by $0.06, were characterized by Sundaram as a "low-quality beat." The better-than-expected results were attributed to a lower tax rate and share buybacks, rather than strong operational performance.
Kraft Heinz’s organic sales saw a decline of 3.1% year-over-year, with a notable negative trend in volume/mix, which decreased by 4.1% compared to the third quarter of 2024. This aligns with InvestingPro’s reported revenue decline of 3.8% over the last twelve months. The forecast for 2025 also appears subdued, with expectations for organic sales to range from flat to a decrease of up to 2.5%. Adjusted EPS is anticipated to drop by 10%-14%, factoring in an 8-point headwind from an increased tax rate and a 2-point headwind from incentive compensation.
Despite the less-than-stellar fourth-quarter results and a cautious outlook for 2025, CFRA maintains a positive stance on Kraft Heinz stock. The firm anticipates potential improvement by the second quarter of 2025, as the company is expected to face easier comparative figures, particularly in its Lunchables product line. Plans to invest in pricing, promotions, and marketing are also seen as potential drivers for a turnaround.
Sundaram highlighted Kraft Heinz’s attractive valuation, with the shares offering a 5.41% dividend yield according to InvestingPro, and a strong balance sheet showcasing a leverage ratio of 2.9 times, as reasons for the continued Buy rating. The stock is currently trading near its 52-week low of $28.31, with a price-to-book ratio of 0.71, suggesting potential value. These factors are believed to provide the company with the flexibility for additional share buybacks or the pursuit of mergers and acquisitions that could enhance margins. For deeper insights into Kraft Heinz’s valuation and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro.
In other recent news, Kraft Heinz Company has been a focal point in analyst discussions. Following their fourth-quarter 2024 earnings release, Stifel maintained their Hold rating on the company. The earnings showed a 7.7% increase, surpassing Stifel’s estimate, but the company experienced a drop in organic sales. Kraft Heinz also provided a forecast for 2025, projecting a decline in organic sales and operating profit.
Jefferies also adjusted their price target for Kraft Heinz, reducing it while retaining a Hold rating. The adjustment was due to observed performance challenges in the U.S. market, particularly in the fourth quarter. Citi also revised their price target for the company, citing potential challenges in 2025 such as subdued takeaway trends and increasing foreign exchange pressures.
In other developments, Piper Sandler downgraded Kraft Heinz stock from Overweight to Neutral due to slower than expected retail improvements. The firm also reduced the price target, reflecting a lowered target multiple based on these retail trends. Nevertheless, these are recent developments and investors are advised to follow the situation closely.
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