The Kraft Heinz Company (NASDAQ: KHC) shares have weakened from their recent highs above $44, and the current price stands around $36. Kraft Heinz reported its second-quarter results yesterday and announced that it expects to deliver 2021 adjusted EBITDA ahead of its strategic plan.
Fundamental analysis: Adjusted EBITDA for the full 2021 year should be above the 2019 fiscal year levels
Kraft Heinz reported its second-quarter results this week; total revenue has decreased by -0.5% Y/Y to $6.62 billion, while the non-GAAP EPS was $0.78 (beats by $0.06). Total revenue has decreased below the expectations (beats by $70 million), and the company’s management expects the improving trends in the upcoming quarters.
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Kraft Heinz expects a mid-single-digit percentage increase in organic net sales for the third quarter of 2021, while the adjusted EBITDA for the full 2021 fiscal year should be above 2019 fiscal year levels. The company’s management views comparison to the 2019 fiscal year period to be more meaningful than the comparable 2020 period, given the exceptional COVID-19-related consumer demand changes experienced during the 2020 fiscal year.
“We continue to expect to have a very good 2021 actually to deliver a stronger 2021 than we projected when we provided our initial outlook in February. And that speaks to the strength and potential of our ongoing business,†said Miguel Patricio, Chief Executive Officer of Kraft Heinz.
The board of directors declared a $0.40/quarterly share dividend this Wednesday, which will be payable on September 24 to stockholders of record as of September 1, 2021. Kraft Heinz began the third quarter in a strong position; still, the Delta variant of the coronavirus continues to pose downside risks.
The research company Evercore also sees potential risks for the upcoming quarters mainly due to inflation together with covid concerns. Ken Goldman, an analyst from J.P. Morgan, said that price hikes are a ‘cold comfort’ and expect investors to view food companies with a skeptical eye in the next few quarters.
Fundamentally looking, Kraft Heinz trades at less than seven times TTM EBITDA, and with a market capitalization of $47 billion, shares of this company are fairly valued. Kraft Heinz’s 4.3% dividend looks safe, and the company’s management remains very optimistic about the upcoming quarters in terms of growth which is certainly positive for shareholders.
Technical analysis: Kraft Heinz shares remain under pressure
Kraft Heinz shares have weakened more than 15% since the beginning of June 2021, and if the price falls below $35 support, it would be a “sell†signal, and we have the open way to $30. On the other side, if the price jumps above $40, it would be a signal to trade shares, and the next target could be around $44.
Summary
Kraft Heinz reported its second-quarter results this week and announced that the adjusted EBITDA for the full 2021 fiscal year should be above the 2019 fiscal year levels. Kraft Heinz shares are fairly valued, but if the U.S. stock market enters a more significant correction phase, the share price could be at lower levels.
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