CNBC team plan to discuss this situation with Warren Buffett during Monday. As Berkshire owns around 25% of Kraft-Heinz itâll be interesting to hear his views regarding whether he plans to sell, hold or increase their current position.
I expect it will be another 10% down over next 3 months. Ive learned from experience not to jump in on one freefall. Stocks tend to bleed after a big fall IMO
An SEC accounting investigation, a $15bn impairment, a 10 per cent earnings drop, stagnant YOY Q4 Net Sales, divestitures, and a one-third dividend cut [reducing its quarterly dividend to $0.40 a share, or $1.60 a year â down from $2.50 a year].
Even before the latest sell-off, the shares had fallen about one-third since the 2015 megamerger tie-up.
Lack of innovation and marketing fails to satisfy healthier consumer tastes: $15bn impairment reflects diminished prospects of core brands as Oscar Meyer meats and Kraft cheese.
The writedown highlighted investor concerns that the ruthless cost-cutting for which 3G is renowned had hurt the business.
$30bn in net debt, equivalent to a bulging five times ebida is well above the three times forecast at the time of the 2015 merger and inconsistent with the current investment grade credit rating.
The company forecasts ebitda will fall by nearly a fifth in the first quarter of 2019.
Merged the negatives I read in 2 FT articles. Safe to say, these problems for Kraft Heinz have been years in the making and unlikely to be fleeting. Iâll be interested to hear what Warren Buffet says on this @Mat
Yes I agree with what you said but my intention was to make it clear that when you see a drop, donât close immediately the page and look somewhere else because can be an opportunity!
Anyway this is just my thought
But Iâll continue investing regularly in them, theyâve proven before that they can buy brands and sell them off for big profits. Thatâs basically what Heinz has been doing for years and what has earned them their valuations.
Clearly a bit of a mess currently, I think merging two massive companies has proven more difficult than they thoughtâŠ!
Fortunately, Iâm investing regularly so pound cost averaging will iron out most of todayâs losses over the next few months.
I think that the interview with Warren Buffett will initially be shown on CNBC at around 11am (UK time), midday (CET). I would imagine that extracts of the interview will then be shown throughout the day.
Itâs going to take a lot longer than âa few monthsâ to clear up the mess Kraft Heinz are in. I see a bottom at $25, itâs got a lot more to fall. It will be 1-2 years before you break even, even if you pound cost average.
I agree with others that it may be better to hold off for a bit longer before buying. Although I have never done research into KHC so donât know much about the fundamentals.
Warren Buffettâs comments on overpaying were also interesting!
Do you have any numbers to back up your bottom of $25?
Iâve only recently added Kraft to my portfolio and based on my numbers and future projections, this loss will actually be ironed out completely through pound cost averaging even if the stock value remains as itâs current position. This is largely as it was a small % of the portfolio to begin with (smaller now!).
That would be hilarious, incredible to think that KHC tried to acquire Unilever only 2 years ago. Currently unileverâs Market cap is nearly 4x KHC, itâs amazing the difference a couple of years of bad results can make!
Totally agree, this is a great opportunity if people still think it has value. Just consider this 26% off the price you were about to pay for it. If thereâs a time to invest itâs now - but as Rollingskies sad itâs not going to instantly bounce back
So thinking about this a bit more, 2018 adjusted EPS was $3.53, if you compare that to the earnings of premier foods in the U.K. which has been in a real mire for a long time, a P/E ratio of 5-6 become not unfathomable. At least if stagnating revenues and declining earnings persist. That would place the stock at around $17.65-$21.20
At the moment the dividend probably protects against such a fall but how safe is that exactly? The balance sheet doesnât look strong, with around $38B in debt that comes in around 5.5xEBITDA. The interest is going to be crippling and further dividend cuts may take place in order to address this large debt pile.
Of course I could be wrong! Sales could pick up and earnings could increase which would lead to a much better outlook and valuation. However Iâm sceptical this is going to happen any time soon if indeed at all.