Put Kraft Heinz on Your Shopping List

04/01/2016 8:00 am EST

Focus: STOCKS

Benjamin Shepherd

Analyst, Breakthrough Tech Profits, Global Income Edge and Personal Finance

This company must be smacking its lips at the thought of more confident consumers. Barbecue season is around the corner, and that’s when sales typically pick up for the company, asserts Benjamin Shepherd in Personal Finance.

Since we moved Kraft Heinz (KHC) from our Growth portfolio to the Income portfolio, the stock more than doubled in value.

I believe it will continue to gain ground; especially once it gets past its post-merger jitters.

Kraft Heinz reported fourth-quarter earnings as our last issue went to press, and as we expected, the currency exchange hurt revenue, driving it down 6.1% to $7.12 billion.

Sales also fell 3.1%, but earnings per share were $0.62, well ahead of the $0.58 consensus estimate.

Although Kraft pared back some of its less popular products and brands before the merger, clearly more work is needed.

CEO Bernardo Hees said that he continues to cut spending and streamline the organization while investing in the company’s brands.

Management wants to eliminate at least $1.5 billion in costs by fiscal 2017 and shore up Kraft’s more popular product lines.

That won’t be easy to do, not with seven North American factories closing and employee reductions planned, but those changes will boost margins and earnings considerably.

That, in turn, will leave more room for dividend growth. Currently yielding just shy of 3%, Kraft’s payout isn’t particularly generous, but as costs drop and its product mix reflects consumer taste and demand better, I expect the payout to grow in the coming quarters. Buy Kraft Heinz under $90.

Subscribe to Personal Finance here…

By Benjamin Shepherd in Personal Finance.

More from MoneyShow.com:

J.M. Smucker: Cash Flow Machine

Brand Buys: Starbucks and Whole Foods

McCormick: The Right Spice

Related Articles on STOCKS