Market Overview

Kraft Heinz No Longer A Buy At Deutsche Bank

Share:
Kraft Heinz No Longer A Buy At Deutsche Bank

Deutsche Bank has been a Kraft Heinz Co (NASDAQ: KHC) bull since at least early 2016, but the research firm sees multiple concerns ahead and said Tuesday that investors need to "let the dust settle" before being buyers of the stock.

The Analyst

Deutsche Bank's Rob Dickerson downgraded Kraft Heinz from Buy to Hold with a price target lowered from $58 to $52.

The Thesis

Investor sentiment surrounding the food company is "fairly low," and Deutsche Bank's checks and analysis point to improving distribution, velocity and share trends in U.S. channels versus competitors, Dickerson said in the downgrade note.

Yet the same checks also point to generic brands increasing their distribution, especially within Kraft Heinz's biggest categories, the analyst said. 

Kraft Heinz has been active in competing against generic brands by lowering its price points and focusing on promotional activities, Dickerson said. But the spread between Kraft Heinz's higher weighted average category dollar share and those of private labels were flat year-over-year in the fourth quarter, and Kraft Heinz's volume share gap contracted 65 basis points, he said. 

While investors are wise to question Kraft Heinz's effectiveness in competing against smaller generic brands, recent investments in price could impact the bottom line if its commodity cost basket re-inflates in 2019, Dickerson said.

To counter these concerns, the food company needs to show notable volume or mix improvements and improved margins and reaffirm its prior 2019 EBITDA growth guidance before investors can become aggressive buyers again, in Deutsche Bank's view. 

Price Action

Kraft Heinz shares were up 0.16 percent at $47.80 at the time of publication Tuesday. 

Related Links:

Susquehanna Downgrades Kraft Heinz After Q3 Earnings Miss

Kraft Heinz Has Appetite For Campbell's, But JPMorgan Isn't Biting

Latest Ratings for KHC

DateFirmActionFromTo
Sep 2019MaintainsEqual-Weight
Aug 2019MaintainsMarket Perform
Aug 2019ReiteratesNeutral

View More Analyst Ratings for KHC
View the Latest Analyst Ratings

Posted-In: Deutsche Bank food Rob DickersonAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (KHC)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
IHRTGoldman SachsInitiates Coverage On15.0
FICOBairdInitiates Coverage On352.0
ENBBarclaysDowngrades
EHTHRaymond JamesInitiates Coverage On90.0
BMCHRBC CapitalUpgrades
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Trading Daily
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com

US Services Purchasing Managers' Index: Shutdown, What Shutdown?

NTSB Rails Against PTC Implementation Delays