BofA Securities analyst Bryan D. Spillane reiterated the Buy rating on The Kraft Heinz Company
Yesterday, the company reported a second-quarter FY24 sales decline of 3.6% year-on-year to $6.48 billion, missing the analyst consensus estimate of $6.55 billion.
Sales in North America declined 3.1% Y/Y, and International Developed Markets dropped 5%. Organic net sales slipped 2.4%.
Spillane highlights that total company price contribution for the year is now expected to be flat to slightly positive, while sequential volume improvement in the second half, though not back to positive, is expected.
The analyst models FY24 -1.5% organic sales growth (-2.5% volume and +1% price). Spillane also raised the FY24 EPS estimate to $3.00 from $2.90 and maintained FY25-26 EPS of $3.04 and $3.21.
Stifel analyst Matthew E. Smith reiterated the Buy rating on Kraft Heinz with a price forecast of $40.
The lower topline outlook is not surprising given the weaker consumption environment while greater cost efficiencies limit the profit impact and support greater investments to improve revenue growth, the analyst writes.
Smith now estimates a 1% organic sales decline for the year (versus +0.5% previously), over 2.5% operating profit growth (+3% previously), and EPS growth of 2% to $3.04 (inline with previous expectation).
The analyst expects 40bps of expansion in the second half driven by productivity programs as the company laps the benefit of initiatives that began in the second half of 2023.
Piper Sandler analyst Michael S. Lavery reiterated the Overweight rating with a price forecast of $41.
According to the analyst, Foodservice initiatives can be a catalyst, but not until 2025. KHC upgraded its 'Keystone' counter-top sauce dispensers for restaurants. KHC expects it to drive new, incremental customers as well as replacements from existing customers.
Foodservice growth is slow at the moment (+1.5% excluding planned product exits and its 2Q24 plant closure), but historically has outperformed food at home, the analyst adds.
The analyst also projects that Heinz Sauce Wand (launching in 2025) will drive meaningful incremental revenues.
Other initiatives like sauce taps and its Remix machines can potentially be additive as well. Lavery raised 2024 EPS from $2.95 to $3.01 and 2025 from $3.14 to $3.20.
Price Action: KHC shares are trading lower by 0.27% to $35.12 at last check Thursday.
