Kraft Heinz Stock Drops Again After Credit Suisse Calls For Record Lows

Surprisingly, most analysts are quite bullish on Kraft Heinz

by Josh Selway

Published on Apr 16, 2018 at 10:33 AM
Updated on Apr 17, 2018 at 10:27 AM

Kraft Heinz Co (NASDAQ:KHC) stock is trading down 0.9% today at $60.38, following a downgrade to "underperform" from "outperform" at Credit Suisse. The covering analysts dropped their price target to $55 from $77, and lowered their next two years' earnings-per-share estimates, based on a belief management will struggle to innovate and drive growth. KHC shares have already shed 22.5% in 2018, and hit a record low of $59.48 back on April 3.

This price action reflects broader weakness seen from packaged food stocks. Less than a month ago, General Mills (GIS) sold off after earnings due to a disappointing full-year outlook, and even Hershey (HSY) has been hit hard, with an analyst last week saying the healthy eating craze will hurt the chocolate maker.

Of course, none of this is really new, as we noted back in October the increasing negativity around this group in the form of rising short interest levels and elevated put open interest. Short sellers have continued to target KHC, too, with the number of shorted shares increasing by 12.9% in the last two reporting periods to a record high -- though short interest still accounts for just 2.8% of the equity's float.

Meanwhile, it's surprising to note that most analysts are actually still quite bullish on Kraft Heinz. By the numbers, 11 of the 16 analysts in coverage say to buy the stock, and the average 12-month price target stands all the way up at $75.45. From a contrarian's viewpoint, this would suggest more downgrades and/or price-target reductions could come through and weigh on the shares.

Looking ahead, the company will hold its annual shareholders meeting a week from today, and then will report earnings after the close on May 2. Bulls may note that KHC has actually closed higher following the last two May earnings releases, but considering the shares fell 2.6% after earnings last quarter, the broader sector weakness, and questionable innovation attempts like Mayochup, it's hard to be a Kraft Heinz believer at the moment.

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