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The maker of Jell-O, Oscar Mayer hot dogs and Kraft Cheese Macaroni may need to change menus.
Kraft Heinz swept aside Wall Street with an assortment of bad news on Thursday, starting with a huge loss of assets depreciation of $ 15.4 billion. The food conglomerate added to the unpleasant mix with the disclosure of a US Securities and Exchange survey in its accounting.
"It's unbelievable, and one of the main reasons is that it's the kind of society that you do not expect from that kind of surprise," said Jon Cumon of Fowler College of Business. San Diego State University to CBS MoneyWatch.
Unlike a tech start-up, investors generally turn to a consumer-goods company for stable earnings and growth, said Baumunk, who teaches financial accounting and accounting ethics.
Surprises sent by Kraft Heinz shares tumbled 27% to a record low of $ 35 on Friday, wiping out more than $ 16 billion in market value for the company created as part of a merger in 2015 led by Warren Buffett and the capital investment company 3G Capital.
The company's chief financial officer, David Knopf, told an analyst conference call on Thursday that the company had conducted its own investigation after learning about the SEC investigation and determined that it should have registered 25 million in previous periods instead of the fourth quarter.
"To put it in context, this compares to our total spending on purchases of more than $ 11 billion, which excludes the four major commodity expenditures," said Knopf.
The accounting problem is not material, but raises questions, according to Baumunk. "The credibility of management is really the issue," said the educator. "What else could be out there, are we going to have any other surprises?"
Berkshire Hathaway and Buffett's 3G Capital bought Heinz in 2013 and since the merger with Kraft, he's been busy cutting costs.
Two years later, Kraft Heinz was trying to buy Unilever for $ 143 billion, which could have allowed it to continue cutting costs and increasing margins, analysts said. Now, if Kraft Heinz plans to buy another company to fuel its growth prospects, this avenue may no longer be available.
"We have been optimistic about KHC for its role as a likely consolidator in packaged foods, but we now believe that we are probably overly optimistic about its chances of getting a substantial deal and the quality of the growth profile of any resulting business, "Piper Jaffray analyst, Michael Lavery, said Friday in a customer note.
Although the company has expressed its willingness to participate in the consolidation of the sector – another way of saying to buy more assets – investors would prefer that management settle its own house before buying it. another, said Ken Goldman, a JPMorgan Chase analyst, in a customer note.
"It's more than fair to ask if a fundamental value for 3G [Capital] was created since the merger Kraft Heinz ", wrote Goldman.
Both analysts downgraded the company.
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