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