Should I buy Kraft Heinz shares after Q3 results?

By:
on Oct 29, 2021
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  • Kraft has proven improvements throughout Q3
  • Kraft trades at less than seven times TTM EBITDA
  • The board of directors declared a $0.40/quarterly share dividend

The Kraft Heinz Company (NASDAQ: KHC) shares remain under pressure even though the company reported better than expected third-quarter results on Wednesday and expects to see even better trends in the upcoming quarter.

Momentum is building

Kraft Heinz’s business has proven improvements throughout the third fiscal quarter, and the company reported better than expected results this week. Total revenue has decreased less than 2% Y/Y to $6.32 billion, while the third quarter GAAP EPS was $0.59 (beats by $0.03).

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Kraft Heinz increased its revenue forecast for the full fiscal year during the third-quarter earnings call, and the consistent strong execution should drive healthy growth in the next quarter.

The company’s management expects organic net sales growth in 2021 to be flat compared to an exceptionally strong 2020 period, while the adjusted EBITDA for the full 2021 fiscal year should be above $6.1 billion. Miguel Patricio, CEO of Kraft Heinz said:

This reflects a combination of greater-than-expected organic net sales as well as the company’s ongoing efforts to manage inflationary pressures as it continues to invest in long-term growth. This outlook includes the impact of the sale of the company’s nuts business completed in June but does not include an impact from the pending sale of its natural cheese business.

The board of directors declared a $0.40/quarterly share dividend this Wednesday, which will be payable on December 24 to stockholders of record as of November 26, 2021. Kraft Heinz began the fourth quarter in a strong position and continues to improve its business for long-term growth and advantage.

Bank of America has a buy rating on Kraft Heinz shares following a strong quarterly report but also sees potential risks for the upcoming quarters mainly due to inflation together with covid concerns.

Fundamentally looking, Kraft Heinz trades at less than seven times TTM EBITDA, and with a market capitalization of $44 billion, shares of this company are not expensive.

Kraft Heinz’s 4.3% dividend looks safe; the board of directors is taking action to protect profitability from inflation and remain very optimistic about the upcoming quarters in terms of growth.

$30 represents the strong support

Kraft Heinz stock price has fallen more than 15% after reaching the highest level in 2021 of $44.95 on May 24, and for now, bears remain in control of the price action.

Data source: tradingview.com

Kraft Heinz shares continue to trade near monthly lows, and if the price falls below $35 support, the next target could be $30. On the other side, if the price jumps above $40 resistance, it would signal trading shares, and the next target could be at $45 or even above.

Summary

Kraft Heinz reported better than expected third-quarter results this Wednesday and announced that the adjusted EBITDA for the full 2021 fiscal year should be above $6.1 billion. Kraft Heinz’s 4.3% dividend looks safe, the board of directors is taking action to protect profitability from inflation, and Bank of America has a buy rating on Kraft Heinz shares.