Kraft Heinz falls after UBS turns bearish on inflation impact

May 26, 2022 7:28 AM ETThe Kraft Heinz Company (KHC)By: Clark Schultz, SA News Editor70 Comments

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UBS downgraded Kraft Heinz Company (NASDAQ:KHC) to a Sell rating from Neutral on concerns high inflation will impact sales and profits.

Analyst Cody Ross and team warn that Kraft Heinz (KHC) is contending with one of the highest inflationary pressures over the next 12 months increasing the need to take another round of price increases this year, although that strategy is called unlikely in light of the commentary from Walmart and Target last week.

"We believe it will be difficult for KHC to pass through additional pricing next year and by that time, KHC will likely be battling trade down pressure as consumers’ budgets are squeezed further."

Kraft Heinz (KHC) is also noted to have pulled back significantly on promotions, competes in categories with greater trade down risk, and has what is described as arguably the highest risk to consumer trade down to private label.

UBS forecasts Kraft's (KHC) organic sales and adjusted EBITDA will disappoint this year.

The firm dropped its price target on KHC to $34 from $40.

Shares of KHC fell 2.10% premarket on Thursday to $38.65 to cut into the YTD gain.

Sector watch: These food and beverage stocks are defying the stock market selling pressure.

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