Morningstar

Morningstar, Inc.

Equity Bottom-Up

After digesting Kraft Heinz’s fiscal 2018 results following the delayed release of its 10-K filing, we’re lowering our fair value estimate for the no-moat firm to $54 per share from $60 to reflect more pronounced profit headwinds, including higher input costs in the near term and increased brand spending in the longer term. We expect marketing and research and development to expand to more than 5% of sales in the aggregate over our 10-year forecast versus less than 5% the last few years and our…

For nearly four years, Kraft Heinz's strategic bent has centered on driving out inefficiencies from the organization (by reducing its workforce, rationalizing its North American manufacturing network, and enhancing its supply chain). And the tangible gains resulting from these efforts are undeniable. More specifically, the firm now boasts operating margins in the low- to mid-20s, a level that towers above the mid- to high-teens generated by its packaged-food peers.However, sales have languished…

No-moat Kraft Heinz disclosed in a SEC filing on May 6 that the ongoing investigation into its procurement practices (which has resulted in the delayed filing of its fiscal 2018 10-K and its first-quarter 2019 10-Q) would lead it to restate earnings over the course of the last three years. The identified misstatements relate to the timing of previously recognized vendor agreements, supplier rebates, incentive payments, and pricing arrangements. This builds off its announcement in February during…

Still reeling from a rash of unfavorable headlines that came to light during its fourth-quarter earnings announcement two months ago surrounding a profit contraction, an SEC investigation into its procurement accounting, and a reduction in its quarterly dividend to $0.40 per share from $0.625, no-moat Kraft Heinz announced its CEO Bernardo Hess would be stepping down from the top spot to return to 3G Capital (which acquired Heinz in 2013, orchestrated the merger between Kraft and Heinz in 2015…

United States

The Kraft Heinz Company provides food services. The Company offers foods including ketchup, sauces, meals, snacks, and other food products.

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