Kraft Heinz improved execution applauded by analysts
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Kraft Heinz (NASDAQ:KHC) stock gained sharply on Wednesday after topping earnings expectations as pricing increases offset volume declines. 

The consumer staples company also raised its full-year forecasts given the strong bottom line performance in Q1 and the expectation of easing supply chain and transportation costs as the year continues. Adjusted EBITDA of $1.48B outpaced analyst expectations, which Bank of America analyst Bryan Spillane credited to efficiency gains and margin improvement, which he expects underwrites the raised guidance.

âOur $48 price objective is based on 17x P/E multiple on our CY24 EPS estimate, which is below packaged food group average of 18x,â Spillane wrote while reiterating a Buy rating on the name. âWe believe this is justified based on our view that KHC is positioned well in an environment where at-home consumption remains elevated given that food away from home consumption remains expensive on a relative basis, which is supported by KHC's improvement in share trends and service levels.â

Bank of Americaâs bullish take was echoed by Mizuho, which lauded the transformation strategy pursued by management in a reaction note. The bankâs team noted that Kraft Heinz (KHC) is âan enormous ship to turnâ but the Q1 results suggest that the course is indeed being corrected.

Elsewhere, Wells Fargo analyst Chris Carey told clients that the first quarter print âdelivered upside across the boardâ due to pricing actions offsetting inflationary pressures. Evercore also highlighted productivity gains driving the earnings beat, offsetting international profits that were slightly disappointing in the firmâs view.

That said, both Evercore and Wells Fargo remained on the sidelines, highlighting the debate that will likely take place over the elasticity of demand for Kraft Heinz (KHC) products. 

âWe don't think valuation is a catalyst for KHC yet. We acknowledge KHC's past inconsistency is ultimately a thing of the past. That in mind, KHC nevertheless needs to prove out its top-line algorithm, all the while investing, with EPS growth to lag peers as sales sustainability (and investments) take priority,â Carey concluded. âThis is the right strategy for the long term, but is not the makings of multiple expansion on the stock. Building back valuation will require consistent delivery on the top and bottom line, and we think this is still a ways out.â

Shares of Kraft Heinz (KHC) gained 4.28% near the midpoint of Wednesdayâs trading session.
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