Companies and Brands

How Kraft Heinz Just Destroyed Shareholders (and Maybe Its Future)

Chris Lange

Published: February 22, 2019 11:35 am

Last Updated: January 11, 2020 10:57 am

Kraft Heinz Co. (NASDAQ: KHC) is feeling the hurt on Friday after releasing earnings, announcing a probe by federal regulators and writing down a couple of its major brands. This is far and away the single worst trading day in the history of this stock.

As for the quarterly results, the company reported $0.84 in earnings per share (EPS) and $6.89 billion in revenue. That compares to consensus estimates of $0.94 in EPS and $6.94 billion in revenue, as well as the $0.90 per share and $6.88 billion posted in the fourth quarter of last year.

Kraft Heinz also divulged the receipt of a subpoena in October from the U.S. Securities and Exchange Commission (SEC) regarding its procurement operations, which handle interactions with outside suppliers.

Upon receiving the SEC request for documents, Kraft Heinz launched its own investigation, and that resulted in a $25 million charge to account for higher costs and expenses that should have been accounted for previously.

To make matters even worse, the firm wrote down the value of its iconic Kraft and Oscar Mayer brands as it highlighted the tough environment for the packaged food industry. This write-down totaled roughly $15.4 billion and demonstrates declining fortunes of the iconic brands and other losses in asset value.

These make the trifecta for what is the worst day in trading history for this stock. Obviously, analysts were not pleased with these results. Here’s what a few of them had to say in the aftermath:

• JPMorgan downgraded the stock to a Neutral from Overweight and cut its price target to $37 from $52.
• Barclays downgraded it to Equal Weight from Overweight.
• Stifel downgraded it to Hold from Buy
• UBS cut its rating to Neutral from Buy and its price target to $39 from $55.
• Piper Jaffray downgraded it to Neutral from Overweight and cut its target to $42 from $62.

Shares of Kraft Heinz were last seen down about 28% at $34.63 on Friday, in a 52-week range of $34.51 to $70.01. The consensus analyst price target was $56.00.