Should you buy Kraft Heinz shares as it acquires Brazilian food company Hemmer?

By: Motiur Rahman
Motiur Rahman
Md Motiur is a Financial Analyst at Invezz covering the North American, European and Asian stock markets. He has… read more.
on Sep 23, 2021
  • Kraft Heinz shares on Thursday edged slightly higher after signing an agreement to buy Hemmer.
  • The acquisition is part of KHC’s strategy of adding over 250 meal-enhancing products in Brazil.
  • Companhia Hemmer Indústria e Comércio (Hemmer) is a Brazilian condiments and sauces company.

On Thursday, Kraft Heinz Co (NASDAQ:KHC) shares edged slightly higher after agreeing on a deal to buy Brazilian condiments and sauces company Companhia Hemmer Indústria e Comércio (Hemmer).

Kraft Heinz is buying Hemmer as part of its strategy of adding over 250 meal-enhancing products in Brazil. The South American country is a key market for the US food company. 

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On the other hand, Hemmer will benefit from Kraft Heinz’s distribution network and go-to-market model, while also growing its foodservice channel in the country.

Should you invest in KHC shares despite slowing growth?

From a valuation perspective, Kraft Heinz shares seem significantly undervalued at a forward P/E ratio of just 13.94. As a result, value investors could find the stock a compelling option for their portfolios. 

However, with analysts expecting Kraft Heinz earnings per share to decline by more than 85% this year and at an average annual rate of about 2.82% over the next five years, growth investors could opt for alternatives in the market.

Therefore, although KHC could be a good short-term buy, the long-term outlook is less exciting.

Source – TradingView

Is Kraft Heinz facing trendline resistance?

Technically, Kraft Heinz shares seem to be trading under significant bearish pressure in the market sentiment. Furthermore, the stock has failed to breach the trendline resistance in multiple attempts this month.

Therefore, with the shares still trading significantly above the oversold levels of the 14-day RSI, a pullback seems imminent.

As a result, investors can target potential pullback profits at approximately $35.32 or lower at $33.85. On the other hand, if the stock completes a channel breakout, it could find resistance at $38.03 or higher at $39.45.

Bottom line: Kraft Heinz seems poised for a pullback?

In summary, although Kraft Heinz shares are down more than 18% over the last four months, the downward movement seems poised to continue to the foreseeable future.

Moreover, the company failed to disclose the details of the deal to buy Hemmer, leaving investors in a dilemma. As a result, the acquisition is unlikely to become a significant catalyst in the short term.

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