DBS analyst Zheng Feng Chee has maintained their neutral stance on KHC stock, giving a Hold rating yesterday.
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Zheng Feng Chee’s rating is based on a combination of factors that reflect the current challenges and future expectations for Kraft Heinz. The company’s recent net revenue of $6.6 billion aligned with forecasts, yet the organic growth fell short of expectations, particularly in International Developed and Emerging Markets due to weaker volumes. The outlook for organic revenue growth in FY25 is projected to be flat to a decline of 2.5%, alongside an anticipated decrease in earnings by 10% to 15%.
Despite these challenges, Kraft Heinz is investing in marketing and innovation to counter the competitive pressure from private label brands. Supply chain improvements have led to a positive gross margin expansion, although the company anticipates a moderation in margin growth moving forward. The reduced target price and Hold recommendation reflect the flat earnings growth expectations within a high interest rate environment, although there is potential upside if interest rates decline significantly, benefiting the company due to its leverage ratio and attractive dividend yield.
In another report released yesterday, Bank of America Securities also maintained a Hold rating on the stock with a $31.00 price target.