We recently discussed the terrible news surrounding the Kraft Heinz stock (KHC) implosion. We offered our take on the SEC investigation as well as the dividend cut. Total disaster.

In the present column we further elaborate on what the analysts covering the company are saying. Despite some opinion makers calling the drop a buy, we cited $20 as the level at which you could by this stock:



We really feel this is the right value for the name and the dividend yield to balance the risk of pressure revenues and stiff competition as well as the risk of any further breakdowns in the stock from SEC investigations or financial markdowns in business segments. But what are other analysts saying?

PMorgan analyst Ken Goldman downgraded Kraft Heinz to Neutral, but said that despite all of the company’s bad news, he would have maintained his Overweight rating if he still had confidence in the company’s strategy. Goldman said he is concerned that as soon as leverage comes down “it will jump right back up when the next deal is completed.”

Stifel analyst Christopher Growe downgraded Kraft Heinz to Hold and said he believes 2019 will now stand as another investment year for Kraft Heinz. He finds the reduction in the dividend “as most concerning,” noting it was “seemingly completely disconnected from the business performance and outlook.”

UBS analyst Steven Strycula downgraded Kraft Heinz to Neutral and said the tenets to his EBITDA recovery thesis are “impaired” following last night’s Q4 results. But wait, there’s more.





Meanwhile, Piper Jaffray analyst Michael Lavery downgraded Kraft Heinz to Neutral and said that in light of Kraft’s $15B write-down on its key Kraft and Oscar Mayer brands, he’s not confident the company can build or maintain the “brand equity needed to compete in today’s consumer environment in a sustainable, compelling way.” Lavery had been bullish on Kraft Heinz for its role as a likely consolidator in packaged food, but he now believes he was overly optimistic in both its likelihood of getting a sizable deal done and of the quality of the growth profile for any ensuing company.  

Kraft Heinz was also downgraded to Hold from Buy at Berenberg, to Equal Weight from Overweight at Barclays and to Neutral from Buy at BofA Merrill Lynch.

It gets worse. Wells Fargo analyst John Baumgartner said Kraft Heinz had a “striking breadth of disappointments” with its Q4 report, citing its revenue and margin misses, a FY19 guide- down that was far worse than expected, a “massive impairment” and dividend cut.

The analyst, who doesn’t “see any need to buy on weakness, maintained his Market Perform rating on Kraft Heinz shares.

Credit Suisse analyst Robert Moskow cut his price target to $33 from $42 and said this is not a typical “reset the base and everything will be fine” story, as the dividend cut, $15.8B write-down and the guidance for further divestitures demonstrates the hallmarks of a company with a “serious” balance sheet problem and “pokes an enormous hole” in management’s contention that it can execute a meaningful acquisition any time soon.



All in all, we are not recommending a buy until our target is hit of under $30.

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