Investors may want to keep an eye on this oneWith a 50 BP rise in a sea of red, Kraft Heinz is showing that investors are soaking up the advice of buying high-yield stocks propagated by prominent financial news outlets and figures.
1KHC trade ideas
Value Investment - KHC - Company to Watch in 2020All comments and likes are very appreciated.
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Fair Value and Profit Drivers
After reviewing results through the first nine months of 2019, we're holding the line on our $50 fair value estimate for Kraft Heinz. We continue to expect sluggish top-line performance near term (which management has attributed to reduced inventory levels at developed market retailers and unfavorable promotional spend), with our forecast calling for a more than 4% reported decline this year. Further, we still anticipate cost pressures in manufacturing, packaging, and logistics and elevated investments behind its brands will eat into profits, and expect operating margins to hover in the low-20s. Our valuation implies fiscal 2020 price/adjusted earnings of 18 times and an enterprise value/adjusted EBITDA multiple of 14 times.
The question for Kraft Heinz Co. is whether new management can execute a turnaround. CEO Miguel Patricio has a marketing background; it remains to be seen if he can fix the company’s fundamentals in an industry struggling to reinvent iconic consumer brands to remain relevant.
A key tenet of Kraft Heinz's strategic focus has been on driving cost saves--targeting more than $1.7 billion in savings the past few years. Up until now, the bulk of these savings resulted from corporate workforce reductions (affecting about 4,900 employees, or 12% of its total employee base), a rationalization of its North American manufacturing network (with a net of six plants closed), and enhancements to its supply chain.
In line with our thinking, Patricio's early read on the business is that it's failed to pivot from one centered on intense cost-cutting (following the merger of the two businesses four years ago) to one anchored in rooting out inefficiencies and boosting brand investments. This aligns with our outlook, which calls for the firm to extract $2 billion by fiscal 2020 to fuel its brand spend in light of the intense competitive landscape; we anticipate 65% of its savings will drop to the bottom line, with the remaining 35% reinvested in marketing and research and development. In this context, we expect marketing and R&D will expand to nearly 6% of sales in the aggregate (versus less than 5% the last few years) over the course of our 10-year forecast. Further, we posit input cost inflation pressures are unlikely to subside (partly due to higher protein costs related to a reduction in the supply of hogs stemming from China's African Swine Fever and elevated transportation costs versus recent deflationary trends), which stand to eat into the firm’s margin trajectory. As such, we forecast operating margins will remain in the low-20s over our 10-year explicit forecast, generally in line with fiscal 2018 (but below its mid-20s peak in 2016 and 2017).
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While Kraft Heinz’s shares retreated at a high-single-digit clip following its fourth-quarter print, we don’t think there has been a material deterioration in the story over the past several months to merit such a pullback. Rather, we believe that under the direction of CEO Miguel Patricio (who joined the firm just more than six months ago from wide-moat Anheuser-Busch InBev) Kraft Heinz is stocking up on the ingredients necessary to strike up a more flavorful recipe for the long term (pivoting away from blindly rooting out costs, in favor of sustainable efficiencies, with the intent to funnel a portion of any savings realized to elevate the standing of its brands).
We attribute a portion of the market’s disfavor to the slight delay in the time over which the firm intends to convey the details of its strategic direction, which is now set for early May as opposed to March prior. However, the underlying premise behind this shift (affording the recently appointed head of the U.S., Carlos Abrams-Rivera, who joined Feb. 3 from Campbell Soup, time to reflect on the tenets of its approach and interject his perspective) seems reasonable. And despite this extended horizon, we don’t think the drive to incite change is on hold.
In the aggregate, we see little in the fourth-quarter results (a 2.2% decline in organic sales, a 20-basis-point shortfall in gross margins to 32.2%, and an 80-basis-point erosion in adjusted operating margins to 20.0%) or near-term guidance (suggesting pressure at the sales and profit lines is unlikely to subside in 2020, generally in line with our expectations) to warrant a material change in our $50 fair value estimate. Further, we’re holding the line on our long-term outlook, calling for 2%-3% annual organic sales growth long and operating margins remaining in the low-20s over our 10-year explicit forecast. We continue to posit patient investors should consider stocking up on this no-moat name, which trades 45% below our valuation.
Risk and Uncertainty
We think Kraft Heinz's intent focus on extracting significant costs (at the expense of brand spend) has resulted in the degradation of its brand intangible asset (eroding its brands and retail relationships). Further, attempts to extend the distribution of Kraft's products over Heinz's international network may continue to falter if efforts to tailor its mix to better align with local tastes and preferences prove insufficient.
We also surmise that consumers perceive a few of the categories in which Kraft competes--namely, cheese and packaged meats, which in the aggregate account for around one third of total sales--as commodified, implying purchase decisions are more likely to be based on price rather than brand. In addition, Kraft generates just over 20% of its sales from Walmart, and its bargaining clout could diminish as the base of retail outlets continues to consolidate and market share shifts to mass merchants and warehouse clubs at the expense of traditional grocery stores.
Bouts of unfavorable weather could place upward pressure on input prices for products such as dairy, coffee beans, meat, wheat, soybean, nuts, and sugar. In response to the rampant cost inflation in the cheese, meat, and coffee categories a few years ago, Kraft put through significantly higher prices, but was unable to fully offset the profit hit, given the lag in the benefit. Further, transportation and logistics costs have soared and show little sign of abating, which stands to crimp profit prospects across the industry.
Finally, even with a new management team at the helm, it is unclear whether the firm will be able to orchestrate sufficient change to bolster its financial performance. We think this sizable task could prove more challenging given the intense competitive landscape in which it plays, as it consistently goes to bat against other leading branded operators, private-label fare, and smaller, niche foes (which have proven more agile in their response to evolving consumer trends).
I and/or others I advise hold a material investment in the issuer's securities.
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All comments and likes are very appreciated.
Best Regards,
I0_USD_of_Warren_Buffet
KHC potential head and shoulders patternPotential head and shoulders pattern forming that would likely result with a retest of the 200 week weighted moving average. Next few weeks could see a big swing either way.
Kraft not out of the woods yetThat is what I thought when I read that Kraft is getting a new CEO soon. Chart wise, it is pretty bad, having lost almost 75% from its peak. The current price action also shows continued selling and is not going to be over , yet.
It probably will revisit the support at 28.04 before a pull back. If that does not happen, then we can see it heading southwards to 25.95.
The breakout from the bearish trend on Nov 19 between 30 to 31 dollars might bring short term joy to the buyers but sadly, not for long. So, if you had bought at those level, it depends on your risk tolerance and amount of research you had done on this company. Are you confident they can turn around ? If yes, averaging down at a lower price could be one strategy.
If you have not bought yet, wait a while more as cheap can get cheaper. Patience man.
P/S : Just because I think the price might heads lower does not mean this is a good sell set up as one would be SELLING at the low point and the pull back can takes place anytime. Thus, the risk reward ratio may be inadequate and minus the commission, is it worth it ? Go figure out
KHC - 2.13.2020 - 3 Month OutlookKHC seems to have some nice bottoming momentum structure. May see $37 if earnings are good.
The Kraft Heinz Company (KHC) long.All description on the chart.
Please, don't forget to like and follow.
Thank you.
Buy KHC at above $34- Just Placed a STOP-BUY order at $34.
- This is a long term investment
- I believe the stock has bottomed out
- If price closes above $34, there is a good chance if will soar higher
- Morningstar rates its intrinsic value at $50
KHC(W) Watch Potential SHS bottom - Stabilization 50ma BreakKHC(W) Watch Potential SHS bottom - Stabilization 50ma .618
KHC - it’s about time to show some strengthBuilding up position size in Kraft Heinz TS:(KHC)
Entry: 30.40, SL: 29.50
Targets: T1- 34.83, T2- 36.50 T3- 37.90
Hold: Mid Term
Uncertainty: Medium
Roadmap for Kraft Heinz stock. Clear, sound exit opportunities when Pa hits Target level 3 for profit taking.
Investment Thesis:
1. Possible bottoming reversal pattern forming w PA upside break from downwards sloping trend line since May 2017
2. MACD crossover on the monthly
3. Stochastic crossing to the upside indicating possible buying pressure
4. Entry on current PA sets up great R/R 1:7.19, max drawdown for current trade setup is -2.79%
5. Clear 5 wave structure forming, currently completing Wave 4 of 5
Risks:
1. 1M Rsi is still in bearish territory, possible PA breaking structure and heading south
2. Stochastics could easily flip and head south negating the buying pressure as a false indicator
3. Stock has not officially set in a higher low on the monthly, but smaller TF shows a clear 5 wave structure to base the trade on
4. Stock is relatively new with little history to analyze
5. KHC is still struggling to consolidate its massive product line (most famous being Kraft Heinz Ketchup), cutting operational costs and trying to increase overall profitability
Kraft & Heinz Shows Early Signs of Price Bottoming KHC is down heavily after bouts of bad news about accounting investigation, missed earnings estimates and write downs. Recently it has a crash of around 30% in a single day upon the release of a statement disclosing several aspects of this.
Despite its mishaps, KHC is a well established company with entrenched products. These are often fairly low in cost and consumer staples and would perhaps benefit from a softer economy. The PE ratio has dropped dramatically down to 31 from a high of 80. Buffet is a major shareholder of this stock, and although he is down on it and admits he overpaid, he has expressed his intentions to keep it. There has been a lot of trouble and bad news for KHC, but this could all be marked into the price now. Long opportunities on this offer decent upside potential.
From a technical viewpoint, a long term downwards trend line has now been broken, with the current bottoming happening just after the big one day drop. Trends are most often inclined to end in these sorts of dramatic moves, and the forming of a double bottom and break of the trend line after such a move gives the opportunity to buy in and stop loss under the double bottom.
Swing trade: Buy KHC 31. Stop loss 23. Target 77
Kraft Heinz inverse H&SAfter losing 67% from all time highs. The stock is showing promising potential for reversal.
Inverse H&S pattern with divergence and a clean break of the down trend line. Now just above the 200SMA.
1st target is to close the gap.
Good Luck!
KHC Inverse Head and Shoulder targeting just under $42Looks like KHC has hit a potential bottom with a formed an inverse head and shoulder.
Monthly PSAR flipped bullish.
Targetting the 23.6% retracement which matches H&S measured move at just under $42
Kraft Heinz: Buy OpportunityThe price bounced from the support zone formed by SMA100, SMA200, and the uptrend line. The reversal signal could be used for buying with stop orders below the local swing low. If you missed this opportunity, the next buy signal can be based on a breakout above the local resistance level.
Entry Price: above 32.75
Stop Level: below 29.20
Profit Level: at 41.90
If you decide to take part in this trade, don't forget about the proper risk management. Don't invest all capital in one market and use stop orders.
Disclaimer!
This post does not provide financial advice. It is for educational purposes only! You can use the information from the post to make your own trading plan for the market. But you must do your own research and use it as the priority. Trading is risky, and it is not suitable for everyone. Only you can be responsible for your trading.
KHC head and shoulders bottom formingKHC has been crushed this year but now is showing in to the right shoulder of a Head and Shoulders Bottom.
Using the Edwards and Magee 3% entry rule I have an entry of $34.42 and a measured Target price of $41.55.
This one sits of the watchlist.
KHC, Kraft Heinz Co. - Potential Breakout on H&SNASDAQ:KHC
One of the best set ups.
Currently on Kraft Heinz is developing a classic reversing head and shoulders.
It is also one of the companies in the portfolio of the world's largest investor, Warren Buffett.
If we think about the potential recovery on the stock value, the Risk Reward becomes remarkable and the % of trade realization at profit remains as usual around 45%.
So we've set the alerts and we're waiting for a neckline breakout.
Stay Tuned!
KHC Trend ChangeBroke a downward channel, forming a mid-long term trend change if we can get above $32 gap fill way above here near $48, starting to add to this position while I scale out of my OXY calls.
