Tuesday, June 25, 2019

Guggenheim Analyst: "Kraft Heinz is running out of cash" (KHC; BRK)

Be that as it may be, KHC's largest shareholder, Berkshire Hathaway (26.7% of Kraft Heinz) has $112 billion in cash and equivalents as of the last annual report which Mr. Buffett may be willing to deploy (at a price).
First up, this morning's story at CNBC: 
"Warren Buffett denies tensions with his partner in troubled Kraft Heinz, supports new Kraft CEO".

And second, from Yahoo Finance who seem to be doing more original reporting, the headliner from June 24:
Saving macaroni and cheese maker Kraft Heinz (KHC) may be one of the toughest gigs in Corporate America today (well that and trying to run what’s left of Sears).

But come July 1, veteran marketer Miguel Patricio will officially take his crack as CEO of Kraft Heinz. He assumes the mantle of a company left mostly in tatters by outgoing CEO Bernardo Hees, a long-time 3G cost-cutting focused executive who has led the company since its merger in 2015. The iconic company has been embarrassed by two years of terrible sales growth, a $15 billion write-down to the Kraft and Oscar Meyer trademarks, a depleted corporate culture, an awful stock price and a subpoena from the U.S. Securities and Exchange Commission related to an investigation of its accounting practices.

As we said, this won’t be an easy C-suite gig.

“In our view, Patricio faces a monumental challenge to put Kraft Heinz on a path to success as a standalone company,” contends Guggenheim Securities analyst Laurent Grandet.

Kraft Heinz’s stock has crashed 50% over the past year as its struggles have sent investors packing. The performance — fueled by years of under-investment in its plethora of brands in a bid to boost profits and an industry shift to fresher food — is more disappointing given the rally in comparable staples such as PepsiCo, Coca-Cola and General Mills.

But digging through Grandet’s latest note, one can’t help but to wonder if there is another shoe (or shoes) to drop at Kraft Heinz. A shoe that could completely obliterate the stock price.
“The company finds itself in a precarious situation where (1) the balance sheet is constrained by a high debt burden, (2) the brands are in dire need of heavy investment, (3) the organization lacks enthusiasm and the appropriate level of talent, and (4) the cash flow isn’t sufficient to fund all those urgencies concurrently,” writes Grandet.

What the new Kraft Heinz CEO has to do....

The stock is up a few pennies at $30.74.
It has not done well the last couple years:
KHC The Kraft Heinz Company weekly Stock Chart