Summary
- Kraft Heinz is looking to benefit from COVID-19 which will help the company find some stabillity.
- Kraft Heinz is currently undervalued by the market.
- Kraft Heinz's 3 year downtrend, is broken. Price is ready to breakout from here.
Amongst a global pandemic, some companies are finding ways to make the best of the situation and even capitalizing and revitalizing their business because of it. Kraft Heinz (KHC) is a great example of this. The giant in the industry has been struggling over the past few years, and the stock has followed. COVID-19 has provided them an opportunity to recapture market share, and revitalize some of their marketing. This pandemic has in a way sped up their company-wide transformation, the challenge remains the follow through on the other side of the pandemic. This has pushed the stock to very bullish levels as the price looks to break through resistance.
(Source: Google)
What's Driving Them Forward?
As I mentioned off the top, Kraft Heinz is making the best of a global pandemic. As the company mentioned in their Q1 presentation on April 30th, 2020, they are looking at this as an opportunity to accelerate their transformation and revitalizing their big brands. This transformation they speak of was first announced in November of 2019. The update on the transformation during the Q1 earnings call from CEO Miguel Patricio was:
The transformation work we kicked off last year, together with the flexibility, agility, and creativity of our people, and the tremendous collaboration with our retail customers, are all coming together. Going forward, we have a singular focus: to meet the demand for our products and ensure consumers have the food and nourishment they need during these uncertain times.
Our main objective for 2020 was to lay the foundation for the future growth, the first step in a 3-stage turnaround. I can tell you today, it's turning out to be just that and so much more.
The company proved this by meeting expectations laid out for Q1. Due to COVID-19, they were also able to meet an unexpected sudden increase in demand for their products. These are both very good things for a company that has fumbled around for a number of years now. They are making the best of a crappy situation. The test, now that the world seems to be falling back to some sort of normal, is to learn from what has happened and adjust to maintain the consumption levels.
(Source: Company Presentation)
Looking above we can see that they claim to be on track with the plan for the rest of the year. Kraft Heinz is doing its best to be transparent with what they are seeing in the market, and what they have coming down the pipe. They are expecting Q2 to be strong and help aid the rest of the year if things change for consumers in the second half of the year. The company remains focused on revitalizing its major brands based on what they are seeing in the market, which will help them grow revenue down the road. As investors, all we can ask for is a plan and execution of the plan. It is then up to us to decide if we think the plan has any merit, and this is a plan I can get behind.
