KHC – Market expectations are for Uniform ROA to fade, and management may have concerns about initiatives, demand elasticity, and product quality

March 29, 2022

  • The Kraft Heinz Company (KHC) currently trades below corporate but around historical averages relative to Uniform earnings, with a 23.5x Uniform P/E (Fwd. V/E’).
  • At these levels, markets are pricing in expectations for Uniform ROA to fade to 37%, accompanied by 3% Uniform asset growth.

  • Similarly, analysts also expect Uniform ROA to compress to 42% in 2022, accompanied by immaterial Uniform asset growth.

  • If sustained going forward, these levels would imply a stock price closer to $35, representing 10% equity downside for the firm.

  • Moreover, the firm’s most recent earnings call suggests management may have concerns about initiatives, demand elasticity, and product quality.

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