We recently published a list of The 9 Best Pizza Stocks to Buy Now. In this article, we take a look at how the Kraft Heinz Company (NASDAQ:KHC) compares to other pizza stocks.
How is the pizza market doing?
Pizza originated in Italy and has since spread like wildfire across the globe. It has always been the first choice of consumers and hence its market is growing till date. As reported in one of our articles on the best pizza stocks to buy, the pizza market is expected to register a compound annual growth rate (CAGR) of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion in 2032. The frozen pizza segment is also expected to grow during the period 2023-2028, reaching a market value of $5.96 billion, registering a compound annual growth rate (CAGR) of 4.96%.
The popularity of pizza can be gauged by statistics showing that there are 245,000 pizzerias worldwide, with about 77,000 of them in the US. The US itself recorded record pizza sales of $46.9 billion in 2022, thanks to the opening of over 7,000 outlets in the eight years to 2022. This underlines the fact that the largest pizza chains in the world are based in the US. Pizza Hut, one of the largest pizza brands in the world, is the oldest, having been founded in Kansas, USA, back in 1958.
What’s going on in the industry?
In the frozen pizza segment, meat toppings dominate the market with a 56% share of sales, while vegetable toppings have a 26% share. In contrast, cheese toppings also compete well with a 14% share, it is reported media.Market.us. DiGiorno, Red Baron and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand recognition.
Recent trends in the pizza market include the increasing demand for vegan pizzas (frozen or otherwise); this evolving pizza market is in full swing as new demands for cheese substitutes, all kinds of pepperoni, Mexican meats like birria and chorizo, and new toppings continue to emerge.
What is new in the industry is the rapidly increasing use of technology by operators. A survey shows that 748 pizza makers in the US consider online ordering to be the new preferred way of consuming pizza and that 78.21% of manufacturers are investing heavily to strengthen their brand presence online. Optimism is also high among pizza makers, as most of them believe that sales will grow over the next twelve months.
So, the pizza market will undoubtedly grow indefinitely (or at least it should), and to capitalize on that growth, you need to know which pizza stocks are the best to buy. So let’s get to our list of the 9 best pizza stocks to buy now.
methodology
To compile our list of the 9 best pizza stocks to buy now, we compiled a list of all the companies that have a significant presence in the pizza industry and the related cheese and flour industries. Then, we further narrowed it down based on various metrics such as institutional ownership, the number of analysts covering the stock, and the overall financial health of each stock. We ranked the top remaining companies by the number of hedge funds that had stakes in them as of December 31, 2018. 2nd quarter 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds invest in. The reason is simple: Our research has shown that we can outperform the market by mimicking the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks each quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (Further details can be found here).
A close-up of an assembly line worker inspecting a freshly made jar of spices and sauces.
The Kraft Heinz Company (NASDAQ:KHC)
Number of hedge fund owners: 43
Upside potential: 9.70%
The Kraft Heinz Company (NASDAQ:KHC), one of North America’s largest food and beverage companies, has cheese, pizza, dough, sauces and a whole host of other products in its product portfolio.
In the 2ndand In the first quarter of 2024, The Kraft Heinz Company (NASDAQ:KHC) reported a 3.6% decrease in net sales to $6.5 billion, due to a negative currency impact of 1% and divestitures of 0.2%. Pricing and volume mix impacted organic sales, which declined 2.4%; prices increased 1%, but volumes declined 3.4%, particularly in North America and the international market, where consumer sentiment was subdued; however, there was a positive change in emerging markets.
On the other hand, non-cash impairments of $854 million led to a dramatic decline in operating income by 62.1% to $0.5 billion. However, adjusted operating income increased by 2% over the same quarter of 2023, resulting in adjusted operating income of $1.4 billion, driven by lower costs and efficient pricing. Additionally, adjusted EPS recorded a decline of only 1.3% to $0.78 per share, while unadjusted EPS declined by 90.1% due to massive impairments; this decline on an adjusted basis was due to tax benefits from the prior year and higher adjusted operating income.
Higher adjusted operating income and robust working capital flow (primarily accounts payable and inventory) resulted in the company’s net cash flow increasing 8.1% to $1.7 billion compared to the same quarter in 2023, while free cash flow was $1.2 billion.
While the company has issued full-year adjusted earnings per share guidance in which it expects adjusted earnings to grow by 1 to 3 percent, it has also lowered its organic net sales guidance and now expects it to remain flat in 2024 compared to 2023.
Therefore, strong cash flow generation and cost efficiency are aspects that make one believe in the stock’s prospects as predicted by analysts: 16 analysts expect earnings per share (EPS) of $0.75 and $0.81 per share in the third and fourth quarters, respectively.
For example, 43 hedge funds are optimistic about the stock in the second quarter of 2024, while institutional owners account for 54% of the company’s shares. According to 20 analysts, the stock has an upside potential of 9.7%.
Total KHC 3rd place on our list of the best pizza stocks to buy. While we recognize KHC’s potential as an investment, we believe some highly undervalued AI stocks promise higher returns, and in a shorter time frame. If you’re looking for a highly undervalued AI stock that shows more promise than KHC but trades at less than 5 times earnings, read our report on the cheapest AI stock.
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Disclosure: None. This article was originally published on Insider Monkey.
