Is The Kraft Heinz Company (KHC) trending stock a Buy It Now?
Kraft-Heinz (KHC) is one of the most watched stocks by Zacks.com visitors lately. So it might be worth looking at some of the factors that could affect the stock’s short-term performance.
Shares of this maker of Oscar Mayer meats, Jell-O pudding and Velveeta cheese have returned +0.3% over the past month compared to the +6.3% change in the Zacks S&P 500 composite. Zacks Food – Miscellaneous industry, to which Kraft belongs, gained 4.6% over this period. Now the key question is: where could the stock be heading in the near term?
Although press releases or rumors about a substantial change in a company’s trading outlook will usually “trend” its stock and cause an immediate price change, there are always fundamental facts that ultimately dominate the take. purchase and retention decision.
Revisions to earnings estimates
At Zacks, we prioritize evaluating change in a company’s future earnings projection over anything else. This is because we believe that the present value of its future income stream is what determines the fair value of its stock.
Our analysis is primarily based on how sell-side analysts covering the stock revise their earnings estimates to reflect the latest trading trends. When a company’s earnings estimates increase, the fair value of its stock also increases. And when the fair value of a stock is higher than its current market price, investors tend to buy the stock, causing its price to rise. For this reason, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term movements in stock prices.
For the current quarter, Kraft is expected to post earnings of $0.67 per share, indicating a -14.1% change from the prior year quarter. The Zacks consensus estimate has remained unchanged for the past 30 days.
The consensus earnings estimate of $2.68 for the current fiscal year indicates a -8.5% year-over-year change. This estimate has changed by -0.1% over the last 30 days.
For the next fiscal year, the consensus earnings estimate of $2.78 indicates a +3.8% change from what Kraft was expected to report a year ago. Over the past month, the estimate has changed by -0.4%.
With a strong externally audited track record, our proprietary stock rating tool, Zacks Rank, provides a more conclusive picture of a stock’s price direction in the short term, as it effectively harnesses the power of earnings estimate revisions. . Due to the magnitude of the recent consensus estimate change, along with three other factors related to earnings estimates, Kraft is ranked Zacks Rank #4 (sell).
The chart below shows the evolution of the company’s consensus 12-month EPS estimate:
12 month EPS
Revenue Growth Forecasts
While a company’s earnings growth is arguably the best indicator of its financial health, nothing happens if it can’t grow its revenue. It is almost impossible for a company to increase its profits without increasing its revenue for long periods of time. Therefore, knowing the potential revenue growth of a business is crucial.
For Kraft, the consensus sales estimate for the current quarter of $6.38 billion indicates a year-over-year change of -3.6%. For the current and future fiscal years, the estimates of $25.58 billion and $25.68 billion indicate variations of -1.8% and +0.4%, respectively.
Latest reported results and history of surprises
Kraft reported revenue of $6.05 billion in the last reported quarter, representing a year-over-year change of -5.5%. EPS of $0.60 for the same period versus $0.72 a year ago.
Compared to the Zacks consensus estimate of $5.79 billion, reported revenue is a surprise +4.39%. Surprise EPS was +15.38%.
The company has exceeded consensus EPS estimates in each of the past four quarters. The company has exceeded consensus earnings estimates every time during this period.
No investment decision can be effective without considering the valuation of a stock. Whether a stock’s current price accurately reflects the intrinsic value of the underlying business and the company’s growth prospects is a key determinant of its future price performance.
While comparing the current values of a company’s valuation multiples, such as the price-to-earnings (P/E) ratio, the price-to-sales (P/S) ratio, and the price-to-cash flow (P/CF) ratio , along with its own historical values help determine whether its stock is fairly valued, overvalued or undervalued, comparing the company against its peers on these metrics gives a good idea of the reasonableness of the stock price .
As part of the Zacks Style Scores system, the Zacks Value Style Score (which assesses both traditional and unconventional valuation metrics) organizes stocks into five groups ranging from A to F (A is better than B; B is better than C; and so on. ), which helps determine whether a stock is overvalued, correctly valued, or temporarily undervalued.
Kraft is rated B on this front, indicating that it is trading at a discount to its peers. Click here to see values for some of the rating metrics that led to this rating.
The facts discussed here and plenty of other information about Zacks.com might help determine whether or not it’s worth paying attention to the market buzz about Kraft. However, its Zacks No. 4 ranking suggests it may underperform the broader market in the near term.
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The Kraft Heinz Company (KHC): Free Inventory Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.