The Kraft Heinz Company (NASDAQ: KHC) is a great buy, but just like with all stocks, it's relative to each investor. Investors looking for value, yield and growth may find safety in consumer staples (NYSEARCA: XLP). The reason why Kraft Heinz shares are moving higher is that the turnaround story is gaining momentum and consumer staples are becoming more and more attractive. Kraft Heinz still offers a great value at 14x earnings and a very high yield at over 4.2%.
In this light, it won't be a surprise to see the stock begin a multiple expansion that could very well take the share price up 30% to 60% over the next two years, not counting the impact of future growth.
Kraft Heinz Stock Well Supported by Results
Kraft Heinz's Q3 results are a testament to the company’s efforts over the past two to three years. The net results of divestitures, acquisitions and balance sheet improvement put the company on a trajectory for growth over the next few years. The $6.5 billion in Q3 revenue is not only up 2.8% versus last year and beat the Marketbeat.com consensus by 335 basis points. The gains were driven by double-digit organic strength in both the North America and International business segments, both carried by pricing increases. The company reported a 1,540 basis point impact from higher prices offset by a 3.8% contraction in volume/mix. This is good news because elasticity was expected to land higher.
Moving down to the margins, the company reported a decline in both the gross and the operating margins. However, there are some mitigating factors. For one, noncash impairments account for a large portion of the decline and negative factors were offset slightly by an improvement in interest expense. The reduction in interest expense is the result of debt extinguishment in the prior year and is a tailwind to earnings that should grow in the coming quarters. The takeaway is that adjusted earnings fell by 3.14% versus last year but the $0.63 in adjusted EPS beat the consensus figure by $0.07, or 1,250 basis points to outpace the top-line strength.
The improvement in earnings power should carry through into the coming quarter. The company’s CEO has mentioned that additional price hikes could come next year. As for the fourth quarter, the company reaffirmed its revenue target but raised the low end of its EBITDA range to $5.9 billion from $5.8 billion with commentary that earnings should be near the low end of this new range.
Sell-Side Pushing Kraft Heinz Higher
Both analysts and institutions are getting bullish about Kraft Heinz. The institutions own about 67% of the stock, have been net buyers for the last four quarters including the first weeks of Q4 2022. They’ve added about 3% of the market cap to their holdings in that time and the analyst's sentiment has strengthened along with it. The analyst consensus sentiment is still a "hold," verging on a "buy" and up from a firm "hold" over the last year. The price target is moving higher as well and is up in the 12, three and one-month comparisons with a high likelihood of moving higher now that Q3 results are in the bag.
Technical Outlook: Kraft Heinz Moves Up Inside Range
Price action in Kraft Heinz has been range bound for the last two years but it is moving up within that range now. The post-release premarket action has the price up more than 2.5% and trading at a three-month high, just below the midpoint of the range. If the stock can get above the midpoint of the range near $38.50, a move up to the top of the range (near $45) is likely. If not, shares of KHC may continue to range at the current levels. 
