Summary
- Kraft Heinz has a lot of bad news in store for investors.
- The situation is concerning, although reduced expectations mean that I am willing to average down to $39 and change.
- Kraft Heinz has real issues, but the situation is manageable if smart divestitures are delivered upon and leverage is reduced, although management has some mindset changes to make.
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Kraft Heinz (KHC) announced its kitchen sink quarter as the list of bad news is long. A huge impairment charge, a big dividend cut and projection that earnings could come under continued pressure make the situation look dire. The only bright spot is that divestitures are more easily accretive at these lower multiples, as volumes are increasing, leverage is addressed in a minor way, and this M&A "machine" might itself become a target at some point.
I have averaged down, although I do not expect a swift recovery anytime soon.
