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Will Tough Times Endure for Food Manufacturers in 2Q17?

PART:
1 2 3 4 5 6
Part 6
Will Tough Times Endure for Food Manufacturers in 2Q17? PART 6 OF 6

How HSY, MDLZ, K, and KHC Compare in Terms of Valuations

Kraft Heinz trades at premium

As we discuss the valuations of our four major food processor stocks, we should note that the 12-month forward PE (price-to-earnings) multiple will differ among peers based on factors like growth expectations, capital structure, profitability, and risk-return profiles—just to name a few factors.

How HSY, MDLZ, K, and KHC Compare in Terms of Valuations

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On June 7, 2017, Kraft Heinz (KHC) was trading at a 12-month forward PE (price-to-earnings) ratio of 24.8x, which is higher than its peers. Moreover, the company is also trading at a higher forward PE multiple than the Consumer Staples Select Sector SPDR ETF (XLP), which has a multiple of 22.0x, and the S&P 500 (SPX), which has a multiple of 19.0x.

Analysts expect Kraft Heinz to post 10.7% growth in its bottom line for 2017, which is higher than peers and supports its premium valuation. The company’s long-term EPS growth rate forecast of 23% remains significantly higher than the peer group.

Valuation summaries for HSY, MDLZ, and K

As of June 7, Hershey (HSY) is trading at a 12-month forward PE (price-to-earnings) ratio of 23.5x, which is higher than the forward PE multiple of the broader index. On average, analysts project that the company will report a 9% rise in its bottom-line results for 2017.

On June 7, Mondelēz International (MDLZ) and Kellogg (K) were trading at 12-month forward PE ratios of 21.6x and 18.7x, respectively. Analysts project that Mondelēz will report a 9% rise in EPS for 2017, while Kellogg’s bottom line has been forecast to grow by 5%.

For ongoing updates on this industry, keep checking in with Market Realist’s Food Processors page.

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