Analyst Peter Galbo of Bank of America Securities reiterated a Sell rating on Kraft Heinz, reducing the price target to $27.00.
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Peter Galbo has given his Sell rating due to a combination of factors surrounding Kraft Heinz’s strategic decisions and financial outlook. The company’s announcement to split into two separate entities, “Global Taste Elevation Co” and “North American Grocery Co”, is seen as a move to unlock value by allowing each entity to focus on its specific market segments. However, this separation has not been well-received by its largest shareholder, Berkshire Hathaway, which has expressed disappointment and previously decided to no longer hold board seats at Kraft Heinz.
Galbo also highlights concerns about the potential challenges in value creation for the “Global Taste Elevation Co” due to the inclusion of Shelf Stable Easy Ready Meals, which may complicate acquisition prospects. Furthermore, the financial projections for both entities post-separation indicate a decrease in adjusted EBITDA compared to initial estimates, raising concerns about their financial performance. These factors, combined with the soft fundamentals and potential selling pressure from major shareholders, have led to a lowered price objective and the reiteration of an Underperform rating.