Will Kraft Heinz Stock Fall after 13.4% Jump?


Nov. 1 2019, Published 7:37 a.m. ET

  • Kraft Heinz stock rose more than 13% due to its big EPS beat.
  • The spike in the stock could be an exit point.
  • Kraft Heinz stock has fallen about 25% YTD.

Kraft Heinz (KHC) shares rose more than 13% after the company posted its third-quarter earnings on Thursday. The company’s third-quarter EPS continued to decline. However, Kraft Heinz’s adjusted EPS beat analysts’ expectations by a wide margin. The company’s big earnings beat, the lower-than-expected decline in EBITDA margins, and the price increase were cheered by investors.

While the company’s quarterly performance was impressive, we expect the sluggishness in sales and earnings to continue. The spike in Kraft Heinz stock might be an opportunity to exit.

We think that until the company’s sales and earnings stabilize, investors can book profit with any spike in the stock.

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What does analysts’ consensus estimate indicate?

Wall Street expects Kraft Heinz’s sales to fall more than 4% in 2019. The revenues fell in the first nine months of 2019. Notably, the revenues will continue to decline in the fourth quarter. Analysts expect the company’s top line to stay flat in 2020. The first half will likely remain subdued.

With revenues projected to decline in the near term, the company’s bottom will likely take a hit from lower sales. Weakness in the top line and cost pressure will likely hurt Kraft Heinz’s margins and EPS. Analysts’ estimate indicates that the company’s adjusted EPS will fall by more than 25% in 2019. Also, the 2020 EPS might stay low due to weakness in the first nine months.

Here’s what analysts expect:

  • The fourth-quarter sales will likely fall about 3%. Meanwhile, the adjusted EPS is expected to fall about 25%.
  • The sales for the first quarter of 2020 will likely fall about 1%. Meanwhile, the adjusted EPS is projected to decline about 9%.
  • Kraft Heinz’s sales in the second quarter of 2020 could fall 0.5%. The adjusted EPS is likely fall about 9%.

Analysts see a decline in Kraft Heinz stock

While Kraft Heinz’s third-quarter earnings beat led J.P. Morgan to increase its target price, the consensus target price indicates more than a 10% decline. J.P. Morgan raised the target price to $34 from $28 on Kraft Heinz stock. However, analysts have a consensus target price of $28.94 on the stock. The consensus target price indicates a downside of 10.5% based on the company’s closing price of $32.33 on Thursday.

Among the 18 analysts covering Kraft Heinz stock, 14 recommend a “hold,” one recommends a “buy,” and three recommend a “sell.”


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