Kraft Heinz gains after BMO Capital points to strategic evolution upside
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BMO Capital Markets upgraded Kraft Heinz Company (NASDAQ:KHC) to an Outperform rating after having it slotted at Market Perform
Analyst Kenneth Zaslow and team said KHC's strategic evolution continues to be overlooked by the market and creates a compelling investment opportunity.
Crucially, KHCâs organic sales growth target of 2% to 3% is said to look achievable due to upside with foodservice growth, emerging markets expansion, and the opportunity to reinvigorate underinvested brands.
"Even after exceeding expectations for eight consecutive quarters, increasing its long-term growth algorithm to align with its peers, and reducing its leverage to just over 3x, KHCâs valuation discount to its peers actually expanded in 2022 with its stock underperforming its peers by more than 1,700 basis points over the past 12 month."
BMO Capital derives a price target of $45 on KHC by applying a 16X multiple to the higher 2023 EPS outlook on the expectation KHC's lower than industry-average valuation will begin to converge with its large cap peers.
Shares of Kraft Heinz (KHC) rose 1.01% premarket to $36.98.
The Seeking Alpha Quant Rating on KHC is still flashing Hold with a low grades for growth holding it down.