25.00 +0.03 (0.12%)
After hours: 7:59PM EST
|Bid||24.81 x 800|
|Ask||24.98 x 800|
|Day's Range||24.76 - 25.47|
|52 Week Range||24.76 - 33.78|
|Beta (5Y Monthly)||1.04|
|PE Ratio (TTM)||15.80|
|Earnings Date||May 05, 2020 - May 10, 2020|
|Forward Dividend & Yield||1.60 (6.14%)|
|Ex-Dividend Date||Mar 11, 2020|
|1y Target Est||28.47|
Following the conventional wisdom that consumer-staples stocks are safe for the long term can hurt your portfolio.
These high-debt companies could be next in the wave of credit downgrades, making them more vulnerable to losses Continue reading...
(Bloomberg Opinion) -- For better or worse, the latest developments from the coronavirus outbreak have focused a lot of investor attention on the U.S. stock market. That makes sense, given that the S&P 500 Index set a record high just a week ago but then fell more than 2.5% in consecutive sessions for the first time since 2015; President Donald Trump and aide Larry Kudlow are suggesting that investors buy the dip.The $16.7 trillion U.S. Treasuries market doesn’t offer much guidance on whether the swift risk-off reaction is justified. As I wrote earlier this week, no record is safe in the world’s biggest bond market with so much uncertainty about how the coronavirus will dent the global economy. But just as important, Treasuries have been rallying for more than a year, even as equities soared, in no small part because of longer-term concerns about global growth, inflation and the limitations of developed-market monetary policy near the lower bound of interest rates. It shouldn’t be all that shocking that the benchmark 10-year yield touched 1.31% on Tuesday, a new low.What, then, can investors use to gauge risk tolerance in markets? I’d suggest corporate bonds, which offer some clues that there’s more pain ahead.Just like stocks, the credit markets reached unprecedented levels toward the end of 2019. On Dec. 18, the difference between double-B and triple-B corporate bond yields fell to just 38 basis points, the smallest on record. That meant investors were hardly differentiating between securities rated below investment-grade — otherwise known as junk — and those that still maintained investment-grade quality. I asked at the time: What does a junk bond even mean anymore?I wasn’t the only one shaking my head at that spread. Jeffrey Gundlach, DoubleLine Capital’s chief investment officer, highlighted the phenomenon during his annual “Just Markets” webcast last month, calling double-B corporate debt “one of the worst investments in the bond market.” “I think you’re much better off owning triple-B — I don’t even like triple-B — but I don’t like double-B corporate bonds,” he said on Jan. 7. Just to hammer home the point, he added: “Stay away from double-B corporates is my message.”Any trader who heeded that advice has won big in the past several weeks. The spread between double-B and triple-B bonds is now 127 basis points, the widest in more than six months. It jumped 19 basis points on Tuesday, 22 basis points on Monday and 21 basis points on Jan. 27, three days dominated by investor angst over the spread of the coronavirus. The only other comparable moves in the past year came in August, when U.S. recession fears peaked.Gundlach called the widening since December “a big crack in risk asset confidence” in a Twitter post on Monday.Charts with a left and right Y-axis are often imperfect, but comparing that yield spread to the S&P 500 since the end of 2017 shows a tight fit, especially during bouts of risk-aversion like the final months of 2018 and in August 2019. Corporate bonds retreated from their extremes at a much sharper pace than U.S. equities this time around, which isn’t entirely out of the ordinary but supports the idea that the steep drop in stocks wasn’t just a short-term blip.Now, as I’ve noted before, some technical factors are at play in corporate-bond indexes. For example, part of the reason the yield spread between double-B and triple-B bonds narrowed so much in 2019 was because triple-B duration rose while double-B duration dropped by the most on record. The duration of the double-B index spiked higher earlier this month, which, all else equal, would tend to widen the spread, though it didn’t appear to do so.Also of note: Debt from Kraft Heinz Co., EQM Midstream Partners LP and EQT Corp. remains in the triple-B index for now, even though the ratings of all three companies were cut to junk recently. Again, in theory, bonds from “fallen angels” would have higher yields than before the downgrades, which would narrow the spread between double-Bs and triple-Bs. All told, it’s probably safe to conclude that these factors are small enough and slow-moving enough that they don’t alter short-term spread movements very much.As of Feb. 24, the option-adjusted spread on double-B bonds has jumped to 2.62 percentage points from 1.82 percentage points to start the year, while the spread on triple-Bs is up to 1.35 percentage points from 1.2 percentage points. For some context, those spreads reached 3.65 percentage points and 1.68 percentage points, respectively, during the height of the December 2018 market squeeze. That suggests the high-yield market in particular could be in store for further pain if sentiment doesn’t turn around soon.As for the U.S. investment-grade market, companies aren’t taking any chances with new deals, even with Treasury yields setting record lows. Bloomberg News’s Michael Gambale reported that at least four issuers stood down on Tuesday, marking the first two-day break to start a week since July 1 and July 2.(1)That’s hardly a vote of confidence from the C-suite on the state of the financial markets.The follow-through from stocks to credit is worth watching in the coming days and weeks. As much as traders like to quip that the Federal Reserve is most concerned about the S&P 500, or as much as they use Treasury yields to estimate how many interest-rate cuts are “priced in” for the year, ultimately a lack of market access for companies that need it is a truly perilous situation.Recall that December 2018 marked the first month in 10 years with no speculative-grade bond sales. The Fed quickly pivoted in January 2019 — but what if looser monetary policy isn’t as effective this time around? Lower short-term interest rates mean relatively little in comparison to the Centers for Disease Control and Prevention telling Americans to prepare for significant disruptions of daily life if the coronavirus outbreak begins to spread locally in the U.S., deeming it “not a matter of if, but a question of when, this will exactly happen.”Without a drastic shift in what’s known about the coronavirus, corporate-bond buyers may need to take a similar approach. It no longer seems a matter of if, but of when, spreads widen further in the riskiest corners of the debt markets.(1) He excluded the December holidays and the typical two-week summer hiatus in late August in this analysis.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
InMode, Kraft Heinz, Heico, Leidos and L3Harris Technologies highlighted as Zacks Bull and Bear of the Day
(Bloomberg Opinion) -- Warren Buffett says he’s in the “urgent zone.” It’s the folksy billionaire’s way of calling himself old. But even as Buffett approaches 90, the spotlight-loving chairman and CEO of Berkshire Hathaway Inc. isn’t ready just yet to talk about who will run his giant company when he’s gone. He still has more to say, and more to do — and that could make for an interesting year ahead.Buffett’s annual letter of intrigue arrived Saturday morning, a roundup of thoughts that the Oracle of Omaha has been publishing for six decades. It’s evolved over time into what reads like a love letter to shareholders, to insurance float — the lucrative gift that keeps on giving at Berkshire — and to America as a whole, while taking the occasional jab at Wall Street’s fee-giddy bankers and anyone who thinks Ebitda is an honest profit gauge. Lately, he’s also lamented the lack of cheap takeover targets. The company’s last splashy acquisition was in 2015, when it struck a $37 billion deal for airplane-parts supplier Precision Castparts. Berkshire had $128 billion of cash as of December, about the same level as the previous quarter and many billions more than Buffett would like to see sitting in a bank. The letter, one of two major yearly events for Berkshire investors and Buffett groupies (the other is the shareholder meeting each May) has become more condensed in recent years. But more important to readers is what’s written between the lines — hints of a major deal and signs that the world’s most celebrated businessman is about to step aside. I suspect the former will come before the latter, though not even Buffett can truly know.As mentioned, Buffett will turn 90 this summer, and his right-hand man Charlie Munger is 96. His letter contained an anecdote about a friend from his past who, at the relatively ripe age of 80-something, kept receiving requests from a local newspaper for biographical data so that it could prep the man’s obituary. The request was marked “URGENT.” “Charlie and I long ago entered the urgent zone,” Buffett wrote, assuring shareholders that their company is “100% prepared” for the sad day of their departure and even sharing some details about his will. In my decade covering Berkshire, it’s the most I can remember Buffett discussing what will happen when he’s gone.Over 12 to 15 years after his death, Buffett’s class A shares will be converted into B shares and distributed to various charities; the executors and trustees are otherwise instructed not to sell any Berkshire stock, no matter what. That’s putting a lot of faith in the next CEO, whoever it is. Buffett’s still keeping hush about his succession plans. But in a first this year, he said that shareholders can direct questions directly to his lieutenants, Greg Abel and Ajit Jain, at the May investor meeting. It’s something I suggested Berkshire should start doing at last year’s meeting, and indeed Buffett did hand Abel the mic in a rather symbolic, if impromptu, moment during the Q&A session. Not long ago, Abel’s title was expanded from head of Berkshire Hathaway Energy to vice chairman of all the company’s various operations — except for insurance, which is overseen by Jain. Notably, this year’s letter signaled a desire to invest more of the energy division’s retained earnings to take on large utility projects. He said Berkshire’s operations in the Omaha-based company’s neighboring state of Iowa will be wind self-sufficient by next year thanks to investments in wind turbines, which have helped to keep rates lower than the competition as profits soar. Berkshire Hathaway Energy and BNSF — the railroad Berkshire bought in 2009 — together earned $8.3 billion last year, making them two of the biggest contributors to profit. Abel’s rising profile, along with the emphasis on energy, leads me to wonder whether he’s not only being groomed to take over for Buffett, but also whether Abel could soon make his own M&A splash. Separately, Todd Combs, who manages some of Berkshire's stock-market portfolio, was recently tapped to be CEO of its Geico insurance business. Despite his dual-function sparking succession curiosity, he didn't get a shout-out in the letter.Buffett’s letter always includes a rant on the topics du jour, and this year’s was corporate governance. He penned a section on the “vexing problem” of subservient corporate boards made up of overpaid aging directors, especially those who don’t tap into their own savings to buy shares in the companies they serve. Of course, Berkshire is guilty of some of that. The average age of its board is 74 (including three nonagenarians). Buffett’s celebrity and track record has also allowed him to skirt many of the corporate governance customs expected of other CEOs, such as quarterly earnings calls, more detailed filings and returning cash to shareholders. His successor may not be given so much leeway, especially not with $128 billion sitting around. Reading that finger-wagging section, it was hard not to think of Boeing Co. and General Electric Co. — one company that was once seen as Buffett-investment quality, and another that in many ways tried to be like Berkshire. The downfall of each has been a devastating display of what can happen when leadership isn’t held to account, and I imagine that’s the sort of thing Buffett had in mind when he was writing. Then again, his investment in Kraft Heinz Co. is almost the pot calling the kettle black. Kraft Heinz juiced Ebitda by irresponsibly under-investing in its business — which goes completely against the Buffett way — and all the while it happened under Buffett’s nose. Berkshire is the largest shareholder, and while the Kraft Heinz holding is carried at $13.8 billion on its balance sheet, it had a market value of only $10.5 billion as of Dec. 31 (and is worth even less than that now).Buffett only reveals what he wants to, and it’s clear that succession is on his mind, as is his unending hunger for deals. Is it urgent enough for him to strike soon? To contact the author of this story: Tara Lachapelle at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
I can see why some investors would be tempted by Kraft Heinz (NASDAQ:KHC) at the moment. On its face, Kraft Heinz stock has a lot to like, and a reasonable "buy the dip" case.Source: Casimiro PT / Shutterstock.com The consumer giant owns a portfolio of iconic brands beyond its namesakes, including Planters, Philadelphia cream cheese, and Maxwell House. It should be a defensive business, an attractive attribute in a bull market about to enter its twelfth year.Berkshire Hathaway (NYSE:BRK.A,NYSE:BRK.B), led by famed investor Warren Buffett, remains a major shareholder, and in fact helped lead the merger between Kraft and Heinz. And Kraft Heinz stock is cheap, trading at less than 10x 2019 adjusted earnings per share. It also provides an attractive dividend that yields nearly 6% at the moment.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Failing Tech Stocks to Disconnect From Now But investors should look closer. It doesn't take that much of a close look to see what's wrong with Kraft Heinz and with Kraft Heinz stock. This looks like a value trap, a yield trap, and a stock that investors should avoid. Kraft Heinz Stock Is CheapAs far as the fundamentals go, it's true that Kraft Heinz stock looks cheap relative to its earnings and its dividend. In fact, it's the cheapest major food stock out there -- and it's not really close. Conagra Brands (NYSE:CAG), even after plunging this week following lowered full-year guidance, trades at almost 15x this year's earnings per share. Campbell Soup (NYSE:CPB) has more than its shares of challenges, yet is valued at 19x the midpoint of its fiscal EPS guidance.The dividend yield looks attractive too. Kraft Heinz's 5.86% yield is the 14th-highest in the S&P 500. Index constituents with higher yields all have significant challenges, whether it's traffic issues at Macy's (NYSE:M) and Kohl's (NYSE:KSS) or secular pressures on Ford Motor Company (NYSE:F) and Altria (NYSE:MO).But in both cases, the fundamentals aren't as attractive as they seem. The Problems with KHC StockKHC stock does trade at a significant discount to the sector and the market as a whole. But it should trade at a discount.Kraft Heinz is coming off a 2019 in which adjusted EPS declined 19% year-over-year. In conjunction with its fourth quarter earnings report last week, Kraft Heinz didn't give specific guidance, a departure from its norm. But management said on the Q4 conference call that EBITDA (earnings before interest, taxes, depreciation and amortization) would decline again in 2020 after falling 14% in 2019.EPS will fall. The current Wall Street consensus estimate projects a 20% drop, to $2.27. At that level, Kraft Heinz stock trades at a more reasonable 12x earnings and it's too early to predict a return to growth in 2021.Kraft Heinz's debt load has to be considered as well. Based on guidance, net debt likely is over 5x 2020 EBITDA. That's a concerning leverage ratio, and one that led Kraft Heinz debt to be cut to a 'junk' rating last week. On an enterprise value to EBITDA basis, which incorporates debt into the valuation, Kraft Heinz stock trades at over 10x. That's a much smaller discount to other consumer food plays, most of which are driving at least some growth.Declining earnings and heavy debt both suggest KHC stock should be cheap. And they color the dividend as well. Kraft Heinz already cut its payout last year. A company spokesman said last week there were no plans to do so again.But the company has over $29 billion in debt to pay down. The current $2 billion in annual dividend payments potentially could be put to better use. And if earnings keep falling, Kraft Heinz may not have a choice but to slash its payout a second time. The Bull CaseInvestors can't buy Kraft Heinz stock simply because it's "cheap." They have to believe in the potential for a turnaround.On that front, there's at least a case. But I'm skeptical it's a good one. Kraft Heinz's brands are well-known but they're also under pressure. Grocers continue to push higher-margin private-label products. The likes of Velveeta and Kool-Aid have been shunned by consumers seeking healthier alternatives.Kraft Heinz is trying to fix those brands, but it's going to take time and money. As Dana Blankenhorn detailed on this site a year ago, it was aggressive cost-cutting by hedge fund 3G Capital that led to the current problems. Kraft Heinz increased near-term profits at the cost of the long-term health of its portfolio. It's not the first time 3G's strategy has failed: beer giant Anheuser-Busch InBev (NYSE:BUD) was also created via mega-merger, only to see its shares plunge and its dividend cut.Kraft Heinz is trying to reverse field. The company is ramping marketing spend by 30% or more behind key brands. But I'm skeptical that's enough. Millennials aren't buying processed Velveeta 'cheese' or processed Oscar Mayer lunchmeat no matter how much money Kraft Heinz invests. The company can find some wins in condiments or smaller brands, but the world simply has changed. Kraft Heinz brands, for the most part, seem left behind.If that's the case, it's simply impossible to own KHC stock. Declining earnings won't support upside to the stock given the $29 billion debt load. There aren't costs left to cut; if anything, spending has to normalize even beyond planned increases for 2020. The external environment remains difficult. Kraft Heinz stock does look cheap at first glance, but that's hardly enough.Vince Martin has covered the financial industry for close to a decade for InvestorPlace.com and other outlets. He has no positions in any securities mentioned. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Failing Tech Stocks to Disconnect From Now * 5 Ideal Dividend Stocks for New Investors * 4 Stocks to Buy No Matter Who Wins the 2020 Election The post Kraft Heinz Stock Is Not Worth Chasing appeared first on InvestorPlace.
As U.S. corporations have racked up record levels of leverage after the financial crisis, the ability to keep borrowing at low rates has become increasingly important to stock investors, too.
Fitch Ratings and S&P Global Ratings cut the packaged-foods company’s credit rating to junk (BB+) last week, placing it one notch below its prior spot at the bottom of investment-grade (BBB-) rating scale. The downgrades prompted a selloff in the company’s bonds; that is largely because the junk-bond market has a smaller investor base than higher-rated debt. Another reason for the bond-market selloff is Kraft Heinz’s (ticker: KHC) size.
Back in 2018, many corporates tried to quit. Last year, they borrowed an additional $2.1tn in the form of corporate bonds, says the Paris-based OECD. Over half of investment grade bonds — 51 per cent — was rated triple B, the lowest tier, last year.
The $1.2tn junk bond market just got about $23bn bigger. Kraft Heinz became the largest high-yield bond issuer last week, after it was downgraded by two of the big three rating agencies. Bond investors had been waiting for such a scenario: where big companies that rushed to borrow cheap money after the 2008 financial crisis fail to reduce their debt burdens, and are punished by the rating agencies.
Kraft Heinz saw its bonds lose their investment-grade status and fall into “junk” territory after two credit ratings firms downgraded their debt.
The decision on Friday came after the companies asked the judge to hold the CFTC and two of its commissioners in contempt of court and impose sanctions for breaking a gag order in a $16m settlement announced in August. The CFTC charged Kraft Heinz and Mondelez in 2015 with rigging US grain prices by purchasing massive quantities of Chicago-listed wheat futures.
Warren Buffett's Berkshire Hathaway Inc. started new stakes in Biogen Inc. and Kroger Co. while increasing its stake in Kraft Heinz Co. , the company disclosed late Friday in a Securities and Exchange Commission filing. Berkshire reported a stake of about 648,000 shares of Biogen and 549,000 shares of Kroger that were not listed in last quarter's filing. Kroger shares rose 6% after hours, while Biogen shares advanced 2%. Also, Berkshire increased its stake in Kraft to about 10.5 million shares from 9.1 million in the previous quarter. Berkshire cut its stake in Travelers Cos. to about 312,000 shares from a previous stake of nearly 6 million shares.
(Bloomberg) -- Kraft Heinz Co., the iconic food giant created in a merger five years ago, was downgraded to junk by two credit raters, raising fresh worries among investors that a slowing economy could threaten the broader corporate bond market.The packaged-food company was cut one level to BB+ by S&P Global Ratings, following Fitch Ratings earlier Friday. It will now become a so-called fallen angel, taking it out of investment-grade indexes.Though Kraft Heinz, with just under $30 billion of debt, is a relatively small investment-grade issuer, it will become one of the top three in high yield. It’s just one of many companies that have wound up with a massive debt load as the result of deals, jeopardizing credit ratings in the process.The food giant, created in a deal orchestrated by Warren Buffett and the private equity firm 3G Capital, is in the midst of a turnaround as its brands fall out of favor with consumers. It reported a drop in fourth-quarter sales Thursday that sent its bonds and stock tumbling, the latest sign that the company’s turnaround plan still has a long way to go.“Kraft is to investment grade as Velveeta is to cheese,” said Christian Hoffmann, a portfolio manager at Thornburg Investment Management. “The ingredients dictate what something is and Kraft Heinz is junk.”Profit MarginsThat assessment is a far cry from the days of the merger when 3G went on a high-profile cost-cutting spree that was expected to eventually produce fatter profit margins. Instead, Kraft Heinz was left with a stable of tired brands and few new products that could appeal to consumers’ preference for more natural and less processed foods. Last year, it wrote down the value of its brand portfolio by more than $15 billion.The turmoil has been a headache for Buffett’s Berkshire Hathaway Inc., whose stake over the past year has fallen to about $8.9 billion, down from $14 billion at the end of 2018. The stock was one of the worst performers last year.S&P and Fitch cut the company one level to their highest junk rating. Kraft Heinz debt is already on the way to trading like junk. Its bonds due 2029 now yield about 3.5%, compared to the 2.88% for the average BBB company with similar duration. It’s the worst-performing issuer in both the U.S. and European markets Friday, and the cost to protect its debt against default has spiked to levels last seen in October.Fitch said Kraft Heinz may need to divest a sizable portion of its business in order to reduce debt. Kraft Heinz also needs to cut its dividend, Fitch said in August, but the company said Thursday it would maintain the annual $2 billion payout to shareholders. Fitch maintains a stable outlook, while S&P’s is negative. Moody’s rates the company one step above junk with a negative outlook as of Friday.“We believe it’s important to Kraft Heinz shareholders to maintain our dividend during this time of transformation,” Michael Mullen, a spokesman for the company, said in an emailed statement earlier Friday. Kraft Heinz remains committed to reducing leverage “over time,” he said. The company plans to release a more detailed turnaround plan around the time of its next earnings report in early May.Read more: Kraft Heinz on Junk Rating Chopping Block After Weak EarningsKraft Heinz was one of many companies with BBB ratings, the lowest level of investment grade, which now comprises half of the broader $5.9 trillion market. It’s grown steadily since the financial crisis, as a decade of low interest rates prompted companies to load up on debt for mergers and acquisitions, often at the expense of credit ratings.UBS Group AG strategists led by Matthew Mish predict there could be as much as $90 billion of investment-grade debt to fall to high yield this year. That compares to just under $22 billion in 2019, close to a 20-year low, according to Bank of America Corp. strategists.But a wave of fallen angels, which some investors fear, has yet to follow. Many strategists contend that BBB companies have the ability to defend their investment-grade ratings, whether by selling assets or cutting dividends. Companies like General Electric Co. and AT&T Inc. have done just that to stave off downgrades.(Updates with S&P downgrade throughout)\--With assistance from Claire Boston, Tasos Vossos and Katherine Chiglinsky.To contact the reporters on this story: Molly Smith in New York at firstname.lastname@example.org;Jonathan Roeder in Chicago at email@example.comTo contact the editors responsible for this story: Nikolaj Gammeltoft at firstname.lastname@example.org, ;Sally Bakewell at email@example.com, Larry ReibsteinFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
For the first time ever, PLANTERS is launching all new flavors of everyone’s favorite 90s treat, Cheez Balls!
STOCKSTOWATCHTODAY BLOG Shaky Sales. The three major U.S. stock market indexes were mixed after U.S. retail-sales data showed a sluggish start to the shopping year. The Dow Jones Industrial Average lost 40 points, or 0.
Shares of Kraft Heinz, in which billionaire Warren Buffett's Berkshire Hathaway Inc and Brazilian private equity firm 3G own major stakes, fell about 4%. Chicago-based Kraft Heinz, which last year took a $15.4 billion writedown of key brands including Oscar Mayer hot dogs, has been struggling to grow sales as consumers shift to healthier options and private-label brands. "Following Kraft's commentary around 2020 operating headwinds and its commitment to maintain its dividend, Fitch estimates the company may need to divest up to 20% of its projected 2020 EBITDA to support debt reduction," the agency said.