Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (USD) | Target 1 (USD) | Target 2 (USD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 5 Mar, 25 | KHC | Buy | USD 30.98 | USD 32.5 | USD 33.5 | 5 days | 8.1% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
The Kraft Heinz Company, together with its subsidiaries, manufactures and markets food and beverage products in North America and internationally. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products under the Kraft, Oscar Mayer, Heinz, Philadelphia, Lunchables, Velveeta, Ore-Ida, Maxwell House, Kool-Aid, Jell-O, Heinz, ABC, Master, Quero, Kraft, Golden Circle, Wattie's, Pudliszki, and Plasmon brands. It sells its products through its own sales organizations, as well as through independent brokers, agents, and distributors to chain, wholesale, cooperative, and independent grocery accounts; convenience, value, and club stores; pharmacies and drug stores; mass merchants; foodservice distributors; institutions, including hotels, restaurants, bakeries, hospitals, health care facilities, and government agencies; and online through various e-commerce platforms and retailers. The company was formerly known as H.J. Heinz Holding Corporation and changed its name to The Kraft Heinz Company in July 2015. The Kraft Heinz Company was founded in 1869 and is based in Pittsburgh, Pennsylvania.
Improved Profitability Margins: Despite declining sales, gross profit margin increased by 120 basis points to 34.7% for the full year, while Adjusted Gross Profit Margin rose by 100 basis points, indicating efficiency improvements
Strong Cash Flow and Capital Returns: The company generated $4.2 billion in operating cash flow, up 5.2% year-over-year, and returned $2.7 billion to shareholders, including $1.9 billion in dividends and $988 million in share repurchases
Decline in Net Sales: Kraft Heinz experienced a 3.0% decrease in full-year net sales, totaling $25.8 billion compared to the previous year's $26.6 billion. Similarly, fourth-quarter net sales declined by 4.1% to $6.6 billion
Significant Non-Cash Impairment Losses: The company recorded $3.7 billion in non-cash impairment losses for the year, including a $1.4 billion impairment on the Oscar Mayer brand in Q4, leading to a 103.1% decline in quarterly operating income to a loss of $40 million
Key investment risks for Kraft Heinz include declining net sales, ongoing non-cash impairment losses, consumer behavior shifts affecting volume/mix, rising input and labor costs, and increased tax liabilities due to global minimum tax regulations.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 30.98 | 27.0 | 32.5 | 33.5 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Full-Year Financial Performance
The Kraft Heinz Company reported a 3.0% decline in net sales for fiscal year 2024, totaling $25.8 billion. Organic Net Sales decreased by 2.1%, with price increases of 1.4 percentage points offset by a 3.5 percentage point decline in volume/mix. Gross profit margin improved by 120 basis points to 34.7%, and Adjusted Gross Profit Margin increased by 100 basis points. Operating income decreased by 63.2%, primarily due to non-cash impairment losses amounting to $3.7 billion. However, Adjusted Operating Income showed a modest 1.2% increase, reaching $5.4 billion. Diluted earnings per share (EPS) declined by 2.2% to $2.26, while Adjusted EPS increased by 2.7% to $3.06.
Fourth-Quarter Financial Highlights
For the fourth quarter of 2024, Kraft Heinz reported a 4.1% decrease in net sales to $6.6 billion. Organic Net Sales declined by 3.1%, with a 1.0 percentage point increase in price offset by a 4.1 percentage point decline in volume/mix. Gross profit margin increased by 30 basis points to 34.1%, though Adjusted Gross Profit Margin declined by 40 basis points to 34.4%. Operating income dropped by 103.1%, reflecting non-cash impairment losses of $1.4 billion, primarily related to the Oscar Mayer brand. Despite these losses, Adjusted EPS rose by 7.7% to $0.84, while diluted EPS saw a significant increase of 188.5% to $1.76, driven by the recognition of a $3.0 billion non-U.S. deferred tax asset.
Cash Flow and Shareholder Returns
Kraft Heinz generated $4.2 billion in net cash from operating activities, representing a 5.2% year-over-year increase. Free Cash Flow improved by 6.6% to $3.2 billion. The company returned $2.7 billion in capital to stockholders, including $1.9 billion in cash dividends and $988 million in share repurchases. As of December 29, 2024, Kraft Heinz had $1.9 billion remaining under its publicly announced share repurchase authorization.
Regional Sales Performance
The North America segment recorded net sales of $19.5 billion, a 2.9% decline compared to the prior year, with pricing contributing 1.4 percentage points and volume/mix declining by 4.2 percentage points. International Developed Markets saw a 2.4% decrease in net sales to $3.5 billion, while Emerging Markets declined by 4.3% to $2.8 billion. Price increases helped offset volume/mix declines in Emerging Markets, leading to a 0.5 percentage point net growth in volume/mix.
Challenges and Strategic Initiatives
CEO Carlos Abrams-Rivera acknowledged that 2024 was a challenging year, with sales results falling below expectations. However, the company remained committed to profitability, efficiency initiatives, and brand growth. Key strategic efforts include product innovation, leveraging the Brand Growth System to enhance brand strength, securing new Away From Home clients, and expanding distribution in Emerging Markets. The company aims to invest in growth initiatives while maintaining financial discipline.
2025 Financial Outlook
For fiscal year 2025, Kraft Heinz projects Organic Net Sales to be flat to down 2.5% year-over-year, with sequential improvement expected throughout the quarters. Constant Currency Adjusted Operating Income is anticipated to decline by 1% to 4%, impacted by the prior year’s lower variable compensation costs. Adjusted EPS is expected to range between $2.63 and $2.74, reflecting an increased effective tax rate of approximately 26% due to global tax regulations. Additionally, interest expense is projected at $900 million, with other income/expense expected at approximately ($140) million. These projections do not account for potential future share repurchases.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on The Kraft Heinz Company (NASDAQ: KHC) at the closing market price of USD 30.98, as on March 04, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Consumer Defensive Industry: Packaged Foods
| Company | Change (USD) | Price (USD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| KHC Kraft Heinz Co |
-0.145 0.48% | 30.29 | 15.59 | 11.79 | 1.64 | 0.88 | 2.34 | 11.32 |
| NSRGF Nestle SA |
- -% | 100.79 | 26.86 | 18.76 | 3.13 | 7.10 | 3.81 | 21.70 |
| NSRGY Nestle SA ADR |
0.71 0.70% | 101.87 | 26.82 | 18.66 | 3.18 | 7.07 | 3.81 | 21.70 |
| DANOY Danone PK |
-0.07 0.46% | 15.24 | 28.42 | 16.39 | 1.44 | 2.23 | 1.85 | 12.41 |
| GPDNF Danone S.A |
- -% | 77.10 | 28.47 | 16.56 | 1.44 | 2.26 | 1.83 | 12.33 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is March 04,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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