Is this U.S.-China selloff a buy? A top Wall Street voice weighs in
On Wednesday, Stifel analysts maintained their Hold rating on Kraft Heinz Company (NASDAQ:KHC) shares, with a steady price target of $32.00. The stock currently trades near its 52-week low of $28.31, while offering investors a substantial 5.41% dividend yield, according to InvestingPro data. The decision follows Kraft Heinz’s release of their fourth-quarter 2024 earnings, which delivered a 7.7% increase in EPS to $0.84. This figure surpassed Stifel’s estimate by $0.05 and the consensus estimate by $0.06. The company benefited from a lower tax rate, contributing $0.06 more to earnings per share than Stifel anticipated. InvestingPro analysis indicates the company maintains a GOOD overall Financial Health Score, with particularly strong marks in profitability metrics.
Despite the earnings beat, Kraft Heinz experienced a 3.1% drop in organic sales for the quarter, attributed to a 4.1% fall in volume/mix that was slightly mitigated by a 1.0% gain from pricing. Looking ahead, the company has provided its initial guidance for the year 2025, projecting organic sales to range from a 2.5% decline to flat. Additionally, they forecast operating profit to decrease by 1% to 4% on a constant currency basis, and EPS to be in the range of $2.63 to $2.74, which reflects a decrease of 10.5% to 14%. These projections include a 7.5% negative impact from an anticipated higher tax rate and a 2.2% effect from incentive compensation. Notably, InvestingPro data reveals that six analysts have recently revised their earnings expectations downward for the upcoming period.
The company’s weaker sequential volume performance and the 2025 outlook, which falls below the consensus for both organic revenue and EPS (excluding tax headwinds), are expected to exert downward pressure on the stock today. Stifel’s analysts reiterated their Hold rating, signaling a cautious stance on the stock’s immediate prospects. According to InvestingPro’s Fair Value analysis, Kraft Heinz appears undervalued at current levels, suggesting potential upside despite near-term challenges.
Kraft Heinz has made their prepared remarks available HERE and will be hosting a live question and answer session at 9:00 am ET to discuss the earnings report and future expectations in greater detail.
In other recent news, Kraft Heinz has been the subject of multiple analyst revisions. Jefferies analyst Rob Dickerson adjusted the price target for Kraft Heinz to $30, down from $34, while maintaining a Hold rating. This revision follows observations of significant volume declines and share losses in the company’s U.S. market, particularly in the fourth quarter.
Similarly, Citi analyst Thomas Palmer revised the price target for Kraft Heinz shares to $34 from $38, citing potential challenges for the food and beverage giant in 2025, including subdued measured takeaway trends and increasing headwinds from foreign exchange fluctuations. Despite these challenges, Palmer maintained a Buy rating on the stock.
In another development, Piper Sandler downgraded Kraft Heinz’s shares from Overweight to Neutral and reduced the price target to $35 from $40. The downgrade was attributed to slower than expected retail improvements, with any significant improvement predicted to be 2-3 quarters away.
These are recent developments that have seen Kraft Heinz’s financial forecasts adjusted, with the estimated earnings per share for 2025 being lowered from $3.10 to $3.05 and the 2026 EPS forecast set at $3.23, according to Piper Sandler. The changes in EPS estimates and price target reflect a lowered target multiple, based on the slower than expected improvement in retail trends.
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