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Kraft Heinz (NASDAQ:KHC) received a rare upgrade Wednesday as BMO Capital’s Kenneth Zaslow goes from Market Perform to Outperform and sets a $46 price target, suggesting 25% upside from current levels.
Zaslow said the company’s strategic evolution continues to be overlooked by the market and creates a compelling investment opportunity.
The analyst highlights that this strategic evolution includes: Leadership, cultural, & organizational changes, Portfolio transformation, Company-wide embracement of data analytics, Retailer relationships, Pricing and strategic revenue management, and Holistic cost savings through Agile@Scale.
On the stock’s discount, Zaslow notes that “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, KHC’s 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 months.”
The analyst added that organic sales growth of 2-3% appears achievable, with upside potential reflecting: 1) foodservice growth; 2) emerging markets expansion; and 3) opportunity to reinvigorate underinvested brands. The analyst raised its F2022 and F2023 outlook, as the company should benefit from moderating share losses, a bifurcated consumer, a more resilient portfolio, strategic revenue management, and an improved supply chain.
