TD Cowen analyst Robert Moskow maintained a Hold rating on Kraft Heinz (KHC – Research Report) today and set a price target of $29.00.
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Robert Moskow has given his Hold rating due to a combination of factors impacting Kraft Heinz. The company’s recent earnings slightly exceeded expectations, but its organic sales fell short, with management forecasting further declines in sales and EBIT which are below market expectations. While some view management’s guidance as cautious, the need for more substantial investments in pricing and quality highlights a challenge in regaining consumer interest in their brands. Management’s current focus appears to be on maintaining profitability rather than aggressive growth.
Additionally, the anticipated stability or increase in pricing and gross margins seems at odds with the necessity for deeper price investments. Although Kraft Heinz claims enough productivity offsets to counterbalance inflationary pressures in certain categories, the accelerated decrease in volume suggests the need for more considerable investments and a potential reset in earnings. The company’s turnaround efforts have been undermined by specific operational shortcomings, leading to missed sales targets and market share losses, even in their strong brands. Management plans to address these issues by investing in price and leveraging their Brand Growth System, but confidence in their ability to resolve these challenges remains uncertain.
In another report released today, Barclays also maintained a Hold rating on the stock with a $33.00 price target.