KHC - Kraft Heinz upgraded to 'Buy' at Stifel after earnings reveal strong pricing power

Kraft Heinz’s ( NASDAQ: KHC ) post-earnings plunge has created an attractive entry point for investors, according to Stifel analyst Christopher Growe.

Shares of the Chicago-based food and beverage giant fell over 5% on Wednesday despite beating on top and bottom line earnings estimates and raising full-year sales forecasts.

Growe told clients on Thursday that the stock’s drop has provided “strong upside” opportunity as the stock faces a steep discount to its peers. Additionally, he indicated the operational improvements and international sales growth for the company are not being appropriately appreciated.

As such, he upgraded the stock from “Hold” to “Buy” given the opportunity.

“We see the combination of strong pricing taking hold, the potential for less negative elasticity levels, some relief in the input cost environment, and continued robust International growth as keys to driving the shares higher,” Growe wrote “Our upgrade of the shares follows the company’s solid showing in 2Q22 – sales and EBITDA were both above expectations driven by both stronger price realization and volume growth.”

While he acknowledged inflation as a lingering concern across consumer products, Growe indicated he remains impressed by the company’s resilience to these pressures as displayed in the second quarter earnings release. Indeed, he anticipates gross margins to only grow into the back half of 2022.

Growe assigned a $43 price target, suggesting over 15% upside from Wednesday’s closing price.

Read the earnings call transcript .

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