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- KHC shares fell by around 4% during the pre-market session. The company's second largest investor sold 25.1 million shares.
- Warren Buffett's Berkshire Hathaway is the main investor of Kraft Heinz.
Shares of Kraft Heinz (KHC) fell by around 4% in the pre-market session. 3G Capital Partners continued to reduce its stake in the company. According to the regulatory filing released Monday, the capital of 3G sold 25,068,657 shares, or about 25.1 million Kraft Heinz, for $ 28.44.
Despite the reduction in its stake, 3G Capital Partners remains Kraft Heinz's second largest investor. The company holds about 20% of Kraft Heinz's capital, according to a report by CNBC.
Kraft Heinz has had a poor financial performance in recent quarters. The company struggled to defend its market share. Private label products continue to gain space. Lower prices, higher promotions and increased supply chain costs are weighing on the company's profitability.
Kraft Heinz's revenues fell by 5% in the first half of 2019. At the same time, the company's core EBITDA fell by 19.3%. Adjusted earnings dropped 24% year-over-year (year-to-year).
Notably, in August 2018, 3G Capital Partners sold 20,630,314 shares of Kraft Heinz for $ 59.85.
Due to Kraft Heinz's underperformance and a significant drop in share price, will Buffett follow 3G Capital and reduce its stake in the company? Berkshire Hathaway is the largest shareholder of the company with a 26.7% stake at the end of the second quarter. Kraft Heinz's underperformance detracted from Berkshire Hathaway's performance this year. Read Kraft Heinz: What are Warren Buffett's options? to learn more.
Stock Market Performance and KHC Prospects
Kraft Heinz shares significantly underperformed all markets. Since the beginning of the year, the stock has fallen by 31.2%. In comparison, the S & P 500 index rose 19.6% since the beginning of the year Monday.
We expect Kraft Heinz to continue to underperform in the near term. The company's sales and earnings are expected to decrease in the second half of 2019. Kraft Heinz's financial results are also expected to remain weak in the first half of 2020.
Analysts expect Kraft Heinz revenue to fall by less than 10% over the next few quarters. The net income of the company is expected to show a sharp double digit decline in 2019.
Analysts maintain a "neutral" outlook on Kraft Heinz shares, with a target price of $ 28.39.
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