Kraft Heinz (KHC) is at 52-week lows and this blue-chip stock, while looking due for a turnaround, has a multitude of problems. After missing the mark on earnings, sending the stock lower, investors are further pushed back after twelve months of massive underperformance relative to the S&P 500 - to the tune of 43%. The underperformance, in large part, has been driven by consistent competitive pressure, weak organic growth, and lack of expansion into new markets. I see these factors continuing to be present in the near term, despite the stock's competitive yield. Investors should steer clear for the time being.
Source: CNBC
Earnings Key Takeaways
KHC recently reported Q4 2017 earnings and there were some clear positives right off the bat. Taking a look at the earnings presentation, the first bullet point reads "financial results short of potential." While the reality is negative, as it didn't meet investor expectations, at least it is not sugar-coating it. KHC would have a significantly larger problem if it couldn't admit where it was going wrong. On the positive side, the company did get a step up in profitability, with a long-term tax rate target of 20-24%, with 2018 likely being 23%. This helps to open up capital for investments, such as Big Bet and Go-To-Market.
