Morgan Stanley Downgrades Kraft Heinz Company (KHC) to Underweight

Morgan Stanley analyst Megan Clapp downgraded Kraft Heinz Company (NASDAQ: KHC) from Equalweight to Underweight with a price target of $24.00 (from $27.00).

The analyst comments: "We are downgrading KHC to Underweight as our analysis suggests the company is among the most exposed within our coverage to emerging competitive pressures that reduce visibility to a sustainable topline and margin recovery which are not fully reflected in consensus expectations. While we previously moved to Equal-weight from Underweight on the view that our downside thesis had largely played out and estimates had reset, more recent trends point to a renewed step-up in competitive intensity that we believe heightens fundamental downside risk. KHC’s elevated private label penetration and exposure to structurally weak categories leave it particularly vulnerable to renewed competitive intensity, further limiting visibility to a topline recovery. At the same time, the company has less EPS flexibility than peers, and its relatively advantaged margin profile increases the likelihood that incremental cost relief is reinvested rather than retained. While new leadership could serve as a catalyst for renewed investor interest given the likelihood of a refreshed strategic agenda, we see a long road ahead, with execution risk elevated and an increased likelihood of a near-term reset as competitive pressures intensify."

For an analyst ratings summary and ratings history on Kraft Heinz Company click here. For more ratings news on Kraft Heinz Company click here.

Shares of Kraft Heinz Company closed at $24.24 yesterday.

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