The Warren Buffett-backed Kraft Heinz (NASDAQ:KHC) has struggled mightily with evolving tastes of consumers in recent years. Shares have tumbled 39% in 2019 as of close on August 16. The stock has plunged 20% over the past three months.
Kraft stock had another steep drop after it posted its second quarter 2019 results on August 8. The company reported adjusted earnings of $0.78 per share which were down 21% from the prior year. Organic net sales in the first six months of fiscal 2019 fell 1.5% from fiscal 2018 and profit more than halved to $854 million.
Price cuts at grocery retailers in North American played a large role in pushing down sales for the first half. Grocers have been locked in an increasingly competitive environment as the threat of e-commerce disruption looms.
Analysts have also been critical of the 3G approach to success, which some argue has become overly reliant on cost cutting to drive growth. The company still faces a steep hill to climb when it comes to its balance sheet. Its debt burden stood at $29.8 billion at the end of June.
Buffett’s Berkshire Hathaway sustained one of the largest quarterly losses in its history due to Kraft’s poor output. This led Buffet to state that his company had overpaid for Kraft.
The technicals look friendly for Kraft stock. Shares boast a price-to-earnings ratio of 8 as of close on August 16. The stock had an RSI of 23 at the time of this writing, putting shares in technically oversold territory.
Still, there is too much uncertainty at Kraft right now for me to consider pulling the trigger after earnings.
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