Analyst Christopher Growe boosted his rating on Kraft Heinz stock (ticker: KHC) to Buy from Hold on Thursday, while maintaining a target of $43 for the price. The move comes after the packaged food firm delivered robust second-quarter results, including better-than-expected top- and bottom-line growth, as well as a raised forecast for organic sales growth.
Investors sold the stock regardless, sending it down nearly 6%, partly because of a decline in gross margins. Many expect this pressure to continue.
According to Growe, the tumble has created a buying opportunity. “We are taking advantage of some near-term dislocation in the stock and a discount valuation (15% discount to its peers), against the backdrop of a solid and improving operating environment for the business,” he wrote in a research note.
He believes that the company’s efforts to raise prices will help the shares, and that it will enjoy some relief in terms of its costs for commodities,, while it continues to see strong international growth. That combination of factors makes him more optimistic about the outlook for margins in the second half of the year.
While Kraft raised its full-year sales guidance but only maintained its outlook for earnings before interest, taxes, depreciation and amortization, Growe raised his estimates for both those metrics. “We believe investors should buy the shares here,” he said.
Kraft is up 0.2% to $36.42 in premarket trading. Despite Wednesday’s slide, the shares are still up a little over 1% in 2022, while the