KHC Stock Overview
The Kraft Heinz Company, together with its subsidiaries, manufactures and markets food and beverage products in the United States, Canada, the United Kingdom, and internationally.
Kraft Heinz Competitors
Price History & Performance
|Historical stock prices|
|Current Share Price||US$33.62|
|52 Week High||US$44.87|
|52 Week Low||US$32.73|
|1 Month Change||-11.74%|
|3 Month Change||-11.85%|
|1 Year Change||-10.42%|
|3 Year Change||26.63%|
|5 Year Change||-56.77%|
|Change since IPO||-53.92%|
Recent News & Updates
Does Kraft Heinz (NASDAQ:KHC) Have A Healthy Balance Sheet?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the...
Kraft Heinz: A Turnaround In The Making
Summary Warren Buffett still holds his original position in Kraft Heinz, even after the sharp decline. KHC is a staple in American culture with one of the most recognizable brand names in the world. The company's total debt is decreasing while cash is increasing, solid signs of turnaround execution. Kraft Heinz is showing signs of a successful turnaround Kraft Heinz (KHC) is one of Warren Buffett's most beloved brands and one of the largest holdings in Berkshire Hathaway's (BRK.A) (BRK.B) portfolio. According to Berkshire's most recent 13F, Kraft Heinz occupies the number 7 spot in the portfolio with a total value of $12.4 Billion, representing a 26% ownership of the company. After the merger engineered by Berkshire and 3G Capital in the third quarter of 2015, the stock has been on a literal downward spiral from just after the introduction: Kraft Heinz 2015-Present (yahoo finance) The stock got as high as $92 a share in 2017, but has since plummeted to $35 a share as of September 8th, 2022, a drop of 61%. If the price had maintained its 2017 level, Kraft Heinz would be the 6th largest holding, just over the current value of Occidental Petroleum (OXY). With all that being said, Buffett has remained true to his word on this one when he maintained that he never wanted to sell. My thesis is if Buffett still sees value in this, I'm on board. After analyzing the value of this stock using the Graham Number combined with an examination of the company's improving balance sheet, this has the makings of a turnaround. Kraft Heinz is a buy at today's prices. The Berkshire 3G Merger For those unfamiliar with the story of how Kraft Heinz came about, it was a combined effort by both Berkshire Hathaway and a Brazilian private equity firm 3G Capital who collected all the pieces to put the new company together. The Original terms to shareholders in Berkshire's $23 Billion purchase of H.J. Heinz were as follows: H.J. Heinz Company ("Heinz") today announced the completion of its previously announced acquisition by an investment consortium comprised of Berkshire Hathaway and an investment fund affiliated with 3G Capital. The acquisition agreement was first announced on February 14 and the transaction closed and became effective today. Heinz shareholders will receive $72.50 in cash for each share of common stock they owned as of the effective time of the merger, without interest and less any applicable withholding taxes. As a result of the completion of the merger, the common stock of Heinz will no longer be listed for trading on the New York Stock Exchange and Heinz expects no further trading after the close of business on June 7, 2013. The purchase of Kraft by Berkshire/3G controlled Heinz happened thereafter and the merged company went public in 2015. All in Berkshire spent about $23 Billion on Kraft Heinz, a stake that today is worth only $12.4 Billion. If you've followed this story at all, you're probably aware that Berkshire is hands off and 3G is known as the cost-cutter engineering the turnaround of the company. This turnaround is starting to show signs of success. Signs of a successful turnaround The nadir of Kraft Heinz's woes came in 2019 when an SEC investigation of accounting practices of the firm resulted in an impairment of assets resulting in write-downs of $15.4 Billion. This was comprised of a $7.1 Billion goodwill impairment and an $8.3 Billion impairment of Kraft and Oscar Mayer intangible assets. The impairments left Kraft Heinz with a loss of $12.6 Billion that year. The stock responded accordingly and began to drop thereafter. Fast forward to today and a lot of improvement can be seen in the numbers. When Peter Lynch searched for turnaround stories, the balance sheet was his main key indicator for which direction it was heading. According to the 1989 book One Up on Wall Street a successful turnaround story will have two main components, decreasing total debt with an increase of cash and cash equivalents, let's examine: Kraft Heinz Cash Position 2017-2021 (yahoo finance) Here we can see for the years 2017-2021, the cash position increased an average of 16% per year over this period from $1.6 Billion to $3.45 Billion. Kraft Heinz debt reduction 2017-21 (yahoo finance) In 2017, Kraft Heinz started with $31.5 Billion in total debt and ended in 2021 with only $21.8 Billion in total debt, a $9.7 Billion reduction, a decrease of 30%. Both of these indicators are positive regarding a good turnaround story. While margins have near static forward projections, paying down debt and share buybacks can grow earnings through mindful engineering. Price target and valuation For tangible asset-heavy companies, I like to use the Graham number when setting my target. For those unfamiliar, this price target metric was popularized by Benjamin Graham in the original version of the Intelligent Investor, one of the first value investment classics. The formula is simple The Graham Number = Square Root of (22.5) x (TTM EPS) x (MRQ Book Value per Share). Our inputs are as follows, TTM EPS is $1.23 a share, and the most recent quarter book value per share is $39.83. SQRT (22.5) x ($1.23) x ($39.83) = $33.2. Now, this number is lower than the current market value but I would make one slight tweak to this equation. In an ideal world, earnings are equivalent to free cash flow, but when there are a lot of tangible assets on the books plus some carry-forward of impairments, we often find free cash flow higher than earnings due to accounting practices dealing with depreciation and amortization. Kraft Free Cash Flow (yahoo finance) Let's compare this to the income statement to see the discrepancy between earnings and free cash flow: Kraft Income Statement (yahoo finance) Observing the lines for net income versus free cash flow we can see that free cash flow in 2021 for instance of $4.3 Billion is 4.25 x higher than their net income of $1.027 Billion in 2021. On the income statement, EBITDA is the best proxy for free cash flow, but to be fairer in this reevaluation I will use EBIT as a better metric since as Charlie Munger points out, depreciation is a very real expense. The trailing 12 months' earnings for Kraft Heinz is $1.5 Billion and EBIT is $3.2 Billion, therefore EBIT per share is 2.13 x higher than TTM eps. Let's rework the Graham number using EBIT per share instead of EPS. $1.23 TTM EPS x a factor of 2.13 higher for EBIT gets us $2.6 in EBIT per share. So once again, SQRT (22.5) x ($2.6) x ($39.83) = $48.27 a share, showing the stock currently trading at a discount by this re-calculation. This formula from the Intelligent Investor is not appropriate when evaluating companies that have amazing IP and intangible assets, but still very appropriate when evaluating companies that function on hard assets and some goodwill. This is especially true when some of those hard assets can be sold for income if needed. These are companies that are the most similar to those from Benjamin Graham's era when almost every sellable product or service was 100% tangible. Based on this, I reiterate my buy rating with a price range of $33 on the low end and $48 on the high end. How about the dividends? Kraft also pays a hefty dividend and one of the best ways to grow wealth is to collect dividends of companies that grow their dividends and compound them over time. Looking at the historical data of Kraft Heinz dividend, we can see that the dividend has been cut after that impairment year of 2019. The dividend was .55 cents a share in 2015, increasing up to .625 cents a share by 2018, and then was subsequently cut to .40 cents a share in 2019 and maintained at that level until the present. For the three years of evidence in dividend increases that we have, the CAGR of dividend increases from .55 to .625 an average of 4.35% per year. We can assume that their internal dividend policy if the turnaround is executed well would fall somewhere in this range of a 4% increase per year. Let's do a 10-year compound dividend analysis and use the current dividend yield of 4.44% as my starting basis.
The Kraft Heinz Company: The 4% Yield Is The Price For Investors' Patience
Summary In this article, I will share my research on how Kraft Heinz is undertaking its business model turnaround after even Buffett said he had overpaid for it. A part of the article considers how the company is deleveraging. At the end, I will spend a few words on the alluring dividend yield. Investment Thesis In this article, I would like to share the research I have made so far to assess where exactly The Kraft Heinz Company (KHC) is as it tries to complete a turnaround in its business model to become a more profitable and more reliable company. In fact, Kraft Heinz has been on a rollercoaster over the past years and many investors, though aware of the iconic brands with wide moats the company owns, are now wary of investing into it. Moreover, the 2019 dividend cut made many dividend investors move away from the stock. Kraft Heinz: An Overview Kraft Heinz is the fifth-largest food company in the world, with a revenue of $26 billion. It is well known that The Kraft Heinz Company was born through the merger of Kraft and Heinz in 2015. It is also well known that none other than Warren Buffett played a big role in this operation through Berkshire Hathaway (BRK.A) (BRK.B) that had a 26% stake in the newly formed company. If we think about it, the company had many things that fit into the oracle of Omaha's investing style: both Kraft and Heinz operate in the food industry, a predictable and reliable business, with brands that are renowned all over the world. However, there is something that sounded strange to me once I learned Buffett was in this deal: Kraft-Heinz, although enjoying good EBITDA margins, it is not a company that has a high ROCE, a metric that Buffett usually looks at in order to pick long-lasting compounders. In any case, it is also known by everybody that Warren Buffett admitted in 2019 that he overpaid for the company. In fact, the restructuring program led by Brazilian private equity firm 3G Capital didn't bring the company to the goals meant to be achieved in order to obtain better profitability through cost reduction. This is why in 2019 the company changed its CEO and appointed Miguel Patricio, who is leading the company according to another strategy. Instead of focusing only on costs, Patricio is working on Kraft-Heinz portfolio, divesting from low margin brands and increasing the company's exposure to growth brands in emerging markets. The company is trying to move from being too big to move forward to focusing on scaling in order to achieve better profitability. The name of this renewal program is Agile@Scale. The new business model rebalanced the percentage of Kraft Heinz total net sales, making 65% of total sales coming from grow brands with above industry average margin. Only 15% of total net sales come from brands that need to be energized, as they have below industry average margin. The remaining 20% comes from brands with average margin. Kraft Heinz CAGNY 2022 Presentation The company is continuing to divest from brands that don't fit into this new strategy, and just recently it sold its B2B Powdered Cheese Business to Kerry Group. This is why, given the current portfolio rebalancing, investors should look at both the top and the bottom line of the income statement with some caution since revenues can be seen to go down as some brands are sold. At the moment, I thus prefer to focus on margins and ROCE which gives me an idea of how Kraft Heinz is improving its execution. Financials Just a few months ago, the company boasted that it was executing its new operating model so well that it was raising upwards its guidance. As we can see below, organic net sales are now expected to grow at an annual rate between 2% and 3% while the adj. EBITDA growth should be between 4% and 6% and EPS is expected to grow in the range between 6%-8%. Free cash flow conversion will remain above 100%. Kraft Heinz CAGNY 2022 Presentation Gross margin as a percentage of net sales have already increased by 0.7 percentage point in the past three year, mainly thanks to gross efficiencies, as shown in the graph below. Kraft Heinz CAGNY 2022 Presentation Now, regarding the EPS growth and the free cash flow conversion, Kraft Heinz is confident it will reach its goals because it has already reduced its debt by more than $8 billion while keeping capex under control as a percentage of net sales. Kraft Heinz CAGNY 2022 Presentation Another important aspect Kraft Heinz is committed to is bringing down its net leverage. Over the past three years, the net debt/EBITDA ratio has come down substantially, and it is now close to 3x. With a net debt of $19 billion and an EBITDA of $6.3 billion, the company is getting close to a ratio of 3 that many investors use as a filter in order to decide whether or not to be invested into a company. I do expect that when Kraft Heinz brings this ratio below 3, there might be an increasing interest for the stock from some of these investors. Kraft Heinz Q2 2022 Results Presentation Some Takeaways from Q2 Results Looking at the last earnings report, we can find a few takeaways to understand how the company's business model turnaround is performing. First of all, the portfolio rebalancing is helping the company raise its targets, since the grow section is in fact growing faster than the market at an 8% CAGR vs. Q2 2019. The energize part has done better than the stabilize portion, and this makes sense since the former needs indeed to be "energized". Kraft Heinz Q2 2022 Results Presentation During the quarter, net sales decreased 0.9 percent YoY to $6.6 billion. However, this includes a negative 9.3 percentage point impact from divestitures net of acquisitions and a negative 1.7 percentage point impact from currency. This is why, as I already said, at the moment, I don't think looking at revenues and net income is the best way to assess the company.
|KHC||US Food||US Market|
Return vs Industry: KHC underperformed the US Food industry which returned 0.1% over the past year.
Return vs Market: KHC exceeded the US Market which returned -22.1% over the past year.
|KHC Average Weekly Movement||3.3%|
|Food Industry Average Movement||5.5%|
|Market Average Movement||6.9%|
|10% most volatile stocks in US Market||15.8%|
|10% least volatile stocks in US Market||2.8%|
Stable Share Price: KHC is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.
Volatility Over Time: KHC's weekly volatility (3%) has been stable over the past year.
About the Company
The Kraft Heinz Company, together with its subsidiaries, manufactures and markets food and beverage products in the United States, Canada, the United Kingdom, and internationally. Its products include condiments and sauces, cheese and dairy products, meals, meats, refreshment beverages, coffee, and other grocery products. The company also offers dressings, healthy snacks, and other categories; and spices and other seasonings.
Kraft Heinz Fundamentals Summary
|KHC fundamental statistics|
Is KHC overvalued?See Fair Value and valuation analysis
Earnings & Revenue
|KHC income statement (TTM)|
|Cost of Revenue||US$17.47b|
Last Reported Earnings
Jun 25, 2022
Next Earnings Date
|Earnings per share (EPS)||1.24|
|Net Profit Margin||5.92%|
How did KHC perform over the long term?See historical performance and comparison
4.8%Current Dividend Yield
Is KHC undervalued compared to its fair value, analyst forecasts and its price relative to the market?
Valuation Score 4/6
Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Key Valuation Metric
Which metric is best to use when looking at relative valuation for KHC?
Other financial metrics that can be useful for relative valuation.
|What is KHC's n/a Ratio?|
Price to Earnings Ratio vs Peers
How does KHC's PE Ratio compare to its peers?
|KHC PE Ratio vs Peers|
|Company||PE||Estimated Growth||Market Cap|
GIS General Mills
TSN Tyson Foods
KHC Kraft Heinz
Price-To-Earnings vs Peers: KHC is expensive based on its Price-To-Earnings Ratio (27.2x) compared to the peer average (16.8x).
Price to Earnings Ratio vs Industry
How does KHC's PE Ratio compare vs other companies in the US Food Industry?
Price-To-Earnings vs Industry: KHC is expensive based on its Price-To-Earnings Ratio (27.2x) compared to the US Food industry average (18.2x)
Price to Earnings Ratio vs Fair Ratio
What is KHC's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.
|Current PE Ratio||27.2x|
|Fair PE Ratio||27.7x|
Price-To-Earnings vs Fair Ratio: KHC is good value based on its Price-To-Earnings Ratio (27.2x) compared to the estimated Fair Price-To-Earnings Ratio (27.7x).
Share Price vs Fair Value
What is the Fair Price of KHC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.
Below Fair Value: KHC ($33.62) is trading below our estimate of fair value ($108.94)
Significantly Below Fair Value: KHC is trading below fair value by more than 20%.
Analyst Price Targets
What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?
Analyst Forecast: Target price is more than 20% higher than the current share price and analysts are within a statistically confident range of agreement.
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How is Kraft Heinz forecast to perform in the next 1 to 3 years based on estimates from 16 analysts?
Future Growth Score1/6
Future Growth Score 1/6
Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Forecasted annual earnings growth
Earnings and Revenue Growth Forecasts
Analyst Future Growth Forecasts
Earnings vs Savings Rate: KHC's forecast earnings growth (11.3% per year) is above the savings rate (1.9%).
Earnings vs Market: KHC's earnings (11.3% per year) are forecast to grow slower than the US market (14.8% per year).
High Growth Earnings: KHC's earnings are forecast to grow, but not significantly.
Revenue vs Market: KHC's revenue (0.9% per year) is forecast to grow slower than the US market (7.6% per year).
High Growth Revenue: KHC's revenue (0.9% per year) is forecast to grow slower than 20% per year.
Earnings per Share Growth Forecasts
Future Return on Equity
Future ROE: KHC's Return on Equity is forecast to be low in 3 years time (6.9%).
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How has Kraft Heinz performed over the past 5 years?
Past Performance Score0/6
Past Performance Score 0/6
Growing Profit Margin
Earnings vs Industry
Historical annual earnings growth
Earnings and Revenue History
Quality Earnings: KHC has a large one-off loss of $2.0B impacting its June 25 2022 financial results.
Growing Profit Margin: KHC's current net profit margins (5.9%) are lower than last year (8.1%).
Past Earnings Growth Analysis
Earnings Trend: KHC's earnings have declined by 18.4% per year over the past 5 years.
Accelerating Growth: KHC's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.
Earnings vs Industry: KHC had negative earnings growth (-29.3%) over the past year, making it difficult to compare to the Food industry average (0.3%).
Return on Equity
High ROE: KHC's Return on Equity (3.1%) is considered low.
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How is Kraft Heinz's financial position?
Financial Health Score2/6
Financial Health Score 2/6
Short Term Liabilities
Long Term Liabilities
Financial Position Analysis
Short Term Liabilities: KHC's short term assets ($8.1B) do not cover its short term liabilities ($9.1B).
Long Term Liabilities: KHC's short term assets ($8.1B) do not cover its long term liabilities ($33.6B).
Debt to Equity History and Analysis
Debt Level: KHC's net debt to equity ratio (40%) is considered high.
Reducing Debt: KHC's debt to equity ratio has reduced from 53.3% to 43.1% over the past 5 years.
Debt Coverage: KHC's debt is not well covered by operating cash flow (19.5%).
Interest Coverage: KHC's interest payments on its debt are well covered by EBIT (3.5x coverage).
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What is Kraft Heinz current dividend yield, its reliability and sustainability?
Dividend Score 3/6
Cash Flow Coverage
Current Dividend Yield
Dividend Yield vs Market
|Kraft Heinz Dividend Yield vs Market|
|Company (Kraft Heinz)||4.8%|
|Market Bottom 25% (US)||1.6%|
|Market Top 25% (US)||4.6%|
|Industry Average (Food)||2.7%|
|Analyst forecast in 3 Years (Kraft Heinz)||4.8%|
Notable Dividend: KHC's dividend (4.76%) is higher than the bottom 25% of dividend payers in the US market (1.67%).
High Dividend: KHC's dividend (4.76%) is in the top 25% of dividend payers in the US market (4.69%)
Stability and Growth of Payments
Stable Dividend: KHC has been paying a dividend for less than 10 years and during this time payments have been volatile.
Growing Dividend: KHC has only been paying a dividend for 7 years, and since then payments have fallen.
Earnings Payout to Shareholders
Earnings Coverage: With its high payout ratio (129.2%), KHC's dividend payments are not well covered by earnings.
Cash Payout to Shareholders
Cash Flow Coverage: With its reasonable cash payout ratio (61%), KHC's dividend payments are covered by cash flows.
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How experienced are the management team and are they aligned to shareholders interests?
Average management tenure
Miguel Patricio (56 yo)
Mr. Miguel Patricio has been the Chief Executive Officer of The Kraft Heinz Company since June 25, 2019 and serves as its Director since May 06, 2021 and serves as its Chairman of the Board since May 5, 20...
CEO Compensation Analysis
|Miguel Patricio's Compensation vs Kraft Heinz Earnings|
|Date||Total Comp.||Salary||Company Earnings|
|Jun 25 2022||n/a||n/a|
|Mar 26 2022||n/a||n/a|
|Dec 25 2021||US$9m||US$1m|
|Sep 25 2021||n/a||n/a|
|Jun 26 2021||n/a||n/a|
|Mar 27 2021||n/a||n/a|
|Dec 26 2020||US$6m||US$1m|
|Sep 26 2020||n/a||n/a|
|Jun 27 2020||n/a||n/a|
|Mar 28 2020||n/a||n/a|
|Dec 28 2019||US$43m||US$500k|
Compensation vs Market: Miguel's total compensation ($USD8.61M) is below average for companies of similar size in the US market ($USD13.05M).
Compensation vs Earnings: Miguel's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.
Experienced Management: KHC's management team is considered experienced (3.3 years average tenure).
Experienced Board: KHC's board of directors are not considered experienced ( 2.3 years average tenure), which suggests a new board.
Who are the major shareholders and have insiders been buying or selling?
Insider Trading Volume
Insider Buying: KHC insiders have only sold shares in the past 3 months.
Recent Insider Transactions
|19 Aug 22||SellUS$1,150,803||Rashida La Lande||Individual||30,000||US$38.36|
|29 Jul 22||SellUS$127,960||Rashida La Lande||Individual||3,500||US$36.56|
|10 Jun 22||SellUS$1,066,732||Marcos Lima||Individual||28,855||US$36.97|
|30 Nov 21||SellUS$675,458||Rashida La Lande||Individual||20,000||US$33.77|
|22 Nov 21||SellUS$1,093,823,624||3G Capital, Inc.||Company||30,596,465||US$35.75|
|Owner Type||Number of Shares||Ownership Percentage|
|State or Government||298,408||0.02%|
Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.
|Ownership||Name||Shares||Current Value||Change %||Portfolio %|
The Kraft Heinz Company's employee growth, exchange listings and data sources
- Name: The Kraft Heinz Company
- Ticker: KHC
- Exchange: NasdaqGS
- Founded: 1869
- Industry: Packaged Foods and Meats
- Sector: Food, Beverage & Tobacco
- Implied Market Cap: US$41.199b
- Shares outstanding: 1.23b
- Website: https://www.kraftheinzcompany.com
Number of Employees
- The Kraft Heinz Company
- One PPG Place
- United States
|Ticker||Exchange||Primary Security||Security Type||Country||Currency||Listed on|
|KHC||NasdaqGS (Nasdaq Global Select)||Yes||New Common Stock||US||USD||Jul 2015|
|KHNZ||XTRA (XETRA Trading Platform)||Yes||New Common Stock||DE||EUR||Jul 2015|
|KHC *||BMV (Bolsa Mexicana de Valores)||Yes||New Common Stock||MX||MXN||Jul 2015|
|KHNZ||DB (Deutsche Boerse AG)||Yes||New Common Stock||DE||EUR||Jul 2015|
|KHC-U||ETLX (Eurotlx)||Yes||New Common Stock||IT||EUR||Jul 2015|
|KHC||SWX (SIX Swiss Exchange)||Yes||New Common Stock||CH||CHF||Jul 2015|
|KHC||WBAG (Wiener Boerse AG)||Yes||New Common Stock||AT||EUR||Jul 2015|
|0JRV||LSE (London Stock Exchange)||Yes||New Common Stock||GB||USD||Jul 2015|
|KHC||BVL (Bolsa de Valores de Lima)||Yes||New Common Stock||PE||USD||Jul 2015|
|KHNZ||BUL (Bulgaria Stock Exchange)||Yes||New Common Stock||BG||EUR||Jul 2015|
|KHCB34||BOVESPA (Bolsa de Valores de Sao Paulo)||BDR EACH 4 REPR 1 COM||BR||BRL||Sep 2015|
Company Analysis and Financial Data Status
|Data||Last Updated (UTC time)|
|Company Analysis||2022/09/28 00:00|
|End of Day Share Price||2022/09/28 00:00|
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.