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Kraft Heinz (KHC): Strong Buy on Solid Cost Saving Plans

Zacks

On Oct 14, food and beverage company The Kraft Heinz Company KHC was upgraded to a Zacks Rank #1 (Strong Buy).

What is Driving Kraft Heinz?

Although this Pittsburgh, PA-based packaged food company has been witnessing soft sales in recent times, cost savings have improved margins, mainly in the developed markets of the U.S. and Europe. A portion of its savings is also being re-invested in innovation, brand building and marketing to stimulate top-line growth.

KRAFT HEINZ CO Price and Consensus

KRAFT HEINZ CO Price and Consensus | KRAFT HEINZ CO Quote


Kraft Heinz has implemented many cost-saving measures like the integration of Kraft Foods and Heinz. Management plans to save $1.5 billion of annual costs by the end of 2017, mainly through workforce retrenchment, factory closures and consolidations. The company has garnered about $535 million of cost savings in the first half of 2016. Kraft Heinz is also working on whitespace expansion of the Kraft and Heinz brands in food services as well as international channels.

This company has a compelling earnings surprise history, especially when looking at the previous two quarters. In fact, the company topped expectations in three out of the last four quarters and has an average four-quarter positive surprise of 5.22%. Kraft Heinz has an expected 3-5 year earnings growth rate of 19.54%. What’s more, its share price gained 21.8% year to date.

Kraft Heinz is the fifth-largest branded food and beverage company in the world. It markets many iconic brands which enjoy long-standing consumer recognition. Eight of its brands generate more than $1 billion in sales including Oscar Mayer, Ore Ida, Maxwell House, Planters, Philadelphia, Velveeta, and Smart Ones.

Stocks to Consider

Other favorably ranked stocks in the same sector include Tate & Lyle plc TATYY, The Chefs' Warehouse, Inc. CHEF and ConAgra Foods, Inc. CAG. While Tate & Lyle sports a Zacks Rank #1, Chefs' Warehouse and ConAgra Foods carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tate & Lyle has a current year growth estimate of 6.3%.

Chefs' Warehouse’s sales growth estimate for full-year 2016 is pegged at 11.5%.

ConAgra Foods’ growth estimate for full-year 2016 is 18.2%. Also, it recorded an average positive earnings surprise of 10.66% over the past four quarters, with a beat in three.

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