Two stocks to watch today; Kraft Heinz Co(NASDAQ:KHC) and Starbucks Corporation (NASDAQ:SBUX)

Kraft Heinz Co

Kraft Heinz Co(NASDAQ:KHC) reported weak revenue to $6.27 billion in the third quarter ended 2nd October 2016  from $6.36 billion a year earlier. This is below the analysts’ expectation of the sales of $6.3 billion, as per estimates of Thomson Reuters. Kraft Heinz revenue is affected due to the decrease in the price of the key commodities in the United States, which comprises meats and coffee, as well as from higher promotional expenses in Europe. Additionally, the volume has also decreased due to the lower shipments across several categories.  Therefore the stock is trading subdued today.

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However, this weakness is partially offset by the growth in Lunchables and the macaroni and cheese portfolio, and also gains in coffee in the United States and growth in condiments and sauces globally.

Moreover, Kraft Heinz net income has increased to $842 million as compared to the loss of $168 million due to the gains from cost savings initiatives and the favorable pricing net of key commodity costs. Kraft Heinz cost savings initiatives include the KHC’s integration, restructuring and ongoing productivity efforts. Therefore, the adjusted EPS increased 88.6% to $0.83 compared to corresponding quarter 2015, and is better than the expected earnings of $0.75 by the analysts’

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Q3 2016 Financial Summary (source: Company Reports)

Kraft Heinz has declared a regular quarterly dividend of $0.60 per share of common stock payable on December 16th, 2016 to stockholders of record as of December 2nd, 2016. As per Kraft Heinz CEO Bernardo Hees, the company continues to have the opportunity to improve the offerings and retail execution in several key markets and taking the brands to places they don’t currently compete. Kraft Heinz is focusing now is to finish 2016 strong and set the stage for another year of strong, profitable growth in 2017.

Kraft Heinz has announced that it will close its Lehigh Valley factory by November 18th, 2016 and a year back had announced to close the Upper Macungie plant and six others in the United States and Canada in one or two years as part of a downsizing, which  would shed 2,600 jobs.

Kraft Heinz stock rose over 14% in this year to date (source: Google Finance). According to tipranks.com, 12 analysts cover the stock while recommend a “Strong Buy”. Kraft Heinz consists of amazing brands in which eight different brands are worth more than $1 billion in sales and five other brands that are worth more than $500 million each. Kraft Heinz has an average price target of $100.83, which is a further upside of 16.9%.

Starbucks Corporation

Starbucks Corporation (NASDAQ:SBUX) has reported the fourth quarter and 53-week fiscal year ended October 2nd, 2016. SBUX reported a 16% growth in the net revenues to $5.7 billion in the Q4 2016 due to impact of the 53rd week in Q4 FY16, coupled with incremental revenues from the opening of 2,042 net new stores in a year, and also rising global comparable store sales. SBUX has beaten the analysts’ estimates of $5.68 billion in revenue. Accordingly the stock surged over 2.5% (as of 11:39AM EDT; Source: Google finance)

Starbucks Corporation has also reported in Q4 2016, a 27% growth in the consolidated operating income to $1.2 billion and the operating margin has expanded 180 basis points to 21.5%. Additionally, SBUX reported the Non-GAAP EPS of $0.56, which included $0.06 related to the extra week in Q4 FY16 and has beaten the consensus estimates of 55 cents per share ($0.55). The U.S. comparable store sales has increased 4%. SBUX had opened 690 net new stores in the fourth quarter, bringing the total stores to 25,085 in 75 countries.

Starbucks also repurchased 7.3 million shares of common stock in Q4 FY16 and 118 million shares remains available for purchase. The company has declared a dividend of $0.25 per share, which is a 25% increase, payable on December 2nd, 2016 to shareholders of record as of November 17th, 2016

From left, the Molten Hot Chocolate, Molten Chocolate Frappuccino Blended Beverage, and Molten Chocolate Latte are shown. The Valentine's Molten Chocolate Trio drinks will help celebrate Valentine's Day. Photographed on January 29, 2016. (Joshua Trujillo, Starbucks)

In FY 16, Starbucks has reported a 11% growth in the net revenue to $21.3 billion, and a growth of 16% in the consolidated operating income to $4.2 billion. Consolidated operating margin expanded 80 basis points to 19.6%. Moreover, the global comparable store sales enhanced by 5%, which comprised a 6% risein the Americas segment and a 3% surge in the China/Asia Pacific segment. But EMEA Comparable store sales were flat.

Additionally, Starbucks outlook for FY 17 is over 2,100 new stores globally. The group forecasted mid-single digit comparable store sales growth globally, and the revenue to grow in the double digits. This guidance is below analysts’ consensus and the company has given cautious guidance due to the tough economic and competitive environment.

According to tipranks.com, 12 analysts cover the stock while recommend a “Strong Buy”. The analysts are expecting that the earning to nearly double by FY 19. The new loyalty program will drive mobile payments growth as well as overall sales growth. Additionally, economic uncertainty and competitive pricing do not seem to be impacting same store sales, which are driven by coffee offerings and food innovations. SBUX has an average price target of $65.45, which is a further upside of 26.42%.

 

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