Opinions
Stan Wong
Kraft Heinz Company
KHC-Q
COMMENT
Jan 13, 2017
Stock price when the opinion was issued
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Premium contentThe Kraft Heinz Co. engages in the manufacture and market of food and beverage products. It operates through the North America and International geographical segments. The company was founded on July 2, 2015, and is headquartered in Pittsburgh, PA. Social media mentions are up 1300% in the past 24h.
Consumer staples are outperforming in the last few days, and that speaks to the advantage of having a balanced portfolio. Companies like KHC, UL, KVUE, and Nestle. It's not that they won't be affected (their costs would go up), but they're far less cyclical than other businesses. Earnings will be much more stable. Earnings could fall 10%, but not 50%. Dividends will be sustained.
Companies like Unilever and Nestle are huge in NA, but huge globally as well.
We're seeing the start of an M&A boom. The street yawned when they heard about the KHC deal, yawning that the company is breaking up, spinning off a part of its grocery business, but that's dead wrong. It will keep is fastest-growing brands like Heinz Ketchup and Philly Cream Cheese. The market sees no value in slower brands like Velveeta Cheese, but that's wrong.
People are now more concerned about what they eat. This company's brands are associated with processed foods. It's not going away, but brands will have trouble growing. You'll just get the dividend unless it can come up with some new ideas. Any boom in the US will boost food stocks way less than other areas.
A consumer staples name, and the stock has been a little bit weak in the last little while. Investors have been pulling money out of this space. However, it is one of the faster growing names in packaged food, growing at about a 20% clip in terms of EPS. Pays a decent yield of about 2.75%. Technically, it is probably one of the better consumer staple stocks and is still trading above its 200-day moving average. The only concern he has is that it probably generates quite a bit of its revenues from outside of the US, and will probably lose some money on the top line due to fighting foreign currencies coming in.