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Kraft Heinz (NASDAQ:KHC) was initiated with a Buy rating and $48 per share price target by Mizuho analyst John Baumgartner on Monday.
The analyst told investors in a note that since July 2015’s merger of Kraft and Heinz, investor sentiment has “careened between euphoria and despair.”
“Negativity has improved from the 2019/2020 nadir, but we believe the Street continues to underestimate (and undervalue) growth potential,” wrote Baumgartner. “Consensus FY22E-FY24E CAGRs of +1.5% (revenue), +3% (EBITDA), +4% (EPS) trail the long-term algorithm (+2-3%, +4-6%, +6-8%) and our estimates (+2.7%, +4.5%, +6.5%).”
The analyst added that through FY24E, they see more substantial volume/mix realization and net productivity savings driving upside to consensus. In addition, he pointed to three key reasons for the Buy rating, including the company’s portfolio potential, with improving execution enabling +2-3% revenue, its efficiencies augmenting revenue upside, and cost headwinds moderating.
“Valuation, at 11x our CY23E EBITDA (15% discount to peers) and a 4% dividend yield, enhances the risk/reward,” concluded Baumgartner.
Kraft Heinz shares have gained 1.5% Monday.
