Assessing Kraft Heinz’s Market Valuation



Kraft Heinz’s market valuation

Nestlé SA (NSRGY) and the Kraft Heinz Company (KHC) are leading players in the packaged foods industry (XLP). Kraft Heinz is trading at a higher multiple than peers General Mills (GIS), Campbell Soup (CPB), ConAgra Foods (CAG), McCormick & Company (MKC), Hain Celestial Group (HAIN), Keurig Green Mountain (GMCR), and the J. M. Smucker Company (SJM). Kraft Heinz is also trading at a higher valuation relative to the S&P 500 (SPY) (IVV) (VOO).

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As the above graph shows, as of December 24, 2015, Kraft Heinz was trading at a forward PE (price-to-earnings) multiple of 27.4x, and General Mills was trading at 19.8x forward earnings. In comparison, as of December 24, 2015, Campbell Soup, ConAgra Foods, and McCormick were trading at a forward PE multiple of 19.2x, 17.7x, and 23.9x, respectively.

SPY was trading at a forward PE multiple of 17.5x as of December 24, 2015.

Kraft Heinz’s ETF exposure

The company is a component of the S&P 500 Index (SPY) and the Consumer Staples Select Sector SPDR ETF (XLP). Kraft Heinz constitutes 0.23% and 2.4% of SPY and XLP, respectively. Food companies make up 18.5% of XLP’s portfolio, while food and beverage companies make up 39.6% of XLP’s portfolio.

Kraft Heinz makes up 0.23% and 0.39% of the portfolio holdings of the iShares Core S&P 500 (IVV) and the iShares Russell 1000 Growth ETF (IWF), respectively. Consumer staples companies make up 9.8% and 11.1% of IVV’s portfolio and IWF’s portfolio, respectively.

The Kraft Heinz Company (KHC) makes up approximately 1.6% of the PowerShares ETF (QQQ). Consumer staples companies, including the Kraft Heinz Company, make up 7.2% of the holdings of QQQ.

Now let’s analyze what Kraft Heinz has going for it at the dawn of 2016.


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