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Analyzing Kraft Heinz’s 2Q17 Results

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Part 4
Analyzing Kraft Heinz’s 2Q17 Results PART 4 OF 4

What Analysts Recommend for Kraft Heinz Stock after 2Q17

Ratings summary and target price

Most of the analysts covering Kraft Heinz (KHC) stock are maintaining a positive outlook after the 2Q17 results. The results in the second half of 2017 will most likely benefit from innovation-led, newly launched products and the company’s focus on in-store activity. Productivity and cost savings will also help the company generate higher margins. However, weak consumption trends will continue to dent the company’s financials.

Analysts maintain a consensus score of 2.1 on KHC stock on a scale of 1.0 (“strong buy”) to 5.0 (“strong sell”). Of the 19 analysts covering the stock, 74.0% have recommended a “buy,” and 26.0% have maintained a “hold” rating. As of August 4, 2017, KHC stock was trading 11.4% below the analysts’ target price of $96.53.

What Analysts Recommend for Kraft Heinz Stock after 2Q17

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Peer comparisons

Analysts are maintaining a neutral outlook on Kellogg (K) and General Mills (GIS) stock as weak consumer demand in North America is likely to restrict growth in the current fiscal year. Of the 20 analysts providing recommendations for General Mills, 10.0% have a “buy” rating on the stock, 65.0% have a “hold,” and 25% have a “sell.” As for Kellogg stock, 19.0% of the 21 analysts covering the stock have rated it a “buy,” 67.0% have maintained a “hold,” and 14.0% have recommended a “sell.”

About 64.0% of the 14 analysts covering Conagra Brands (CAG) stock have rated it a “buy,” 22.0% have maintained a “hold,” and 14.0% have recommended a “sell.”

Kraft Heinz trades at a premium

As of August 4, 2017, Kraft Heinz stock was trading at a 12-month forward PE (price-to-earnings) multiple of 23.0x, which is higher than the S&P 500 Index’s (SPX-INDEX) current valuation multiple of 18.1x. The company is also trading at a premium to the peer group average of 19.1x.

On the same date, Kellogg, General Mills, Conagra Brands, Mondelēz International (MDLZ), and Hershey (HSY) were trading at forward PE multiples of 17.2x, 18.1x, 18.2x, 20.7x, and 21.3x, respectively.

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