HJ Heinz (HNZ): A Food Manufacturer Unlike Any Other - Barron's
Tweet
Share
E-mailGet Alerts HNZ Hot Sheet
Join SI Premium – FREE
HJ Heinz Co. (NYSE: HNZ) is one of the few stocks in positive territory today, possibly seeing upside from a bullish article in Barron's today.
Heinz may not be an investors first choice to put in their portfolio: shares have gained just 7% over the last 12-months, and higher input costs will be tough for the consumer staple to pass along to customers.
However, Barron's note that their two main ingredients, potatoes and tomatoes, haven't seen quite the spike that cotton, wheat, and milk have seen. Further, with a $0.45 quarterly dividend yielding 3.7% to investors, a strong presence in emerging markets, and new products in the pipeline, Heinz could return 20% to investors over the next 12-months.
Earlier in the month, Heinz reported third quarter EPS of $0.84 on revs of $2.72 billion, edging out consensus EPS of $0.81 with revs of $2.71 billion. With the announcement, they also said that they were acquiring an 80% stake in Coniexpress S.A. Industrias Alimenticias, which is a food manufacturer in Brazil. One Citi analyst liked this announcement, boosting his price target to $57. The acquisition has the potential to increase Heinz's sales in emerging markets to $2 billion, about 20% of their expected revs in FY12.
Deutsche says that Heinz is ahead of the curve compared to other U.S. food manufacturers, allowing it to build solid positions in China, India, and LatAm, among other locations, which combined account for 30% of top-line growth. The company is aiming for emerging markets to amount to 30% of total revs by 2016.
Heinz own forecast has it earnings $3.04 - $3.10 per share for their fiscal year 2011, slated to end in April. Looking ahead, the Street is expecting EPS of $3.33 for FY12.
While food inflation is rising at about 7 - 8% now, Heinz is only seeing a 4% increase per year, and the company has little-by-little passed those costs on to consumers. Barron's points out that Heinz could generate over $1 billion in savings over the next five years through partnerships and new technology. But the stock isn't cheap, trading at 15.3x FY12 EPS estimates, a 10% premium to the S&P 500.
One concern that investors may have includes foreign exchange risk, with 60% of sales coming from outside the U.S.; Commodity prices rising, failure for consumers to adopt new products, and price increases beyond what consumers are willing to pay will also be risks.
Heinz's shares are trading 0.4% higher this afternoon.
Heinz may not be an investors first choice to put in their portfolio: shares have gained just 7% over the last 12-months, and higher input costs will be tough for the consumer staple to pass along to customers.
However, Barron's note that their two main ingredients, potatoes and tomatoes, haven't seen quite the spike that cotton, wheat, and milk have seen. Further, with a $0.45 quarterly dividend yielding 3.7% to investors, a strong presence in emerging markets, and new products in the pipeline, Heinz could return 20% to investors over the next 12-months.
Earlier in the month, Heinz reported third quarter EPS of $0.84 on revs of $2.72 billion, edging out consensus EPS of $0.81 with revs of $2.71 billion. With the announcement, they also said that they were acquiring an 80% stake in Coniexpress S.A. Industrias Alimenticias, which is a food manufacturer in Brazil. One Citi analyst liked this announcement, boosting his price target to $57. The acquisition has the potential to increase Heinz's sales in emerging markets to $2 billion, about 20% of their expected revs in FY12.
Deutsche says that Heinz is ahead of the curve compared to other U.S. food manufacturers, allowing it to build solid positions in China, India, and LatAm, among other locations, which combined account for 30% of top-line growth. The company is aiming for emerging markets to amount to 30% of total revs by 2016.
Heinz own forecast has it earnings $3.04 - $3.10 per share for their fiscal year 2011, slated to end in April. Looking ahead, the Street is expecting EPS of $3.33 for FY12.
While food inflation is rising at about 7 - 8% now, Heinz is only seeing a 4% increase per year, and the company has little-by-little passed those costs on to consumers. Barron's points out that Heinz could generate over $1 billion in savings over the next five years through partnerships and new technology. But the stock isn't cheap, trading at 15.3x FY12 EPS estimates, a 10% premium to the S&P 500.
One concern that investors may have includes foreign exchange risk, with 60% of sales coming from outside the U.S.; Commodity prices rising, failure for consumers to adopt new products, and price increases beyond what consumers are willing to pay will also be risks.
Heinz's shares are trading 0.4% higher this afternoon.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Are we witnessing a fundamental or speculative rally in the S&P 500?
- Petco Health and Wellness (WOOF) Misses Q1 EPS by 6c
- C3.ai (AI) Tops Q4 EPS by 5c, Beats on Revenue; Offers FY27 Revenue Guidance
Create E-mail Alert Related Categories
Insiders' BlogRelated Entities
Citi, Standard & Poor's, Barron's, Raising Prices, Dividend, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
