We recently compiled a list of the 9 Best Pizza Stocks to Buy Now. In this article, we are going to take a look at where The Kraft Heinz Company (NASDAQ:KHC) stands against the other pizza stocks.
How’s the Pizza Market Doing?
Originating from Italy hundreds of years ago, and spreading across the globe like wildfire ever since, pizza has always been the consumers’ go-to food option, and hence, its market is growing to date. As such, as reported in one of our articles on best pizza stocks to buy, the pizza market is set to experience a CAGR of 4.45% during the period 2024-2032, growing from $148.6 billion in 2023 to $222.5 billion by 2032. Similarly, the frozen pizza segment is also expected to increase during the period 2023-2028, gathering a market size of $5.96 billion during the period, showcasing a CAGR of 4.96%.
The popularity of pizza can be judged from the statistics showing that there are 245,000 pizza restaurants in the world, and around 77,000 restaurants within the U.S. The U.S. itself experienced record-high pizza sales of $46.9 billion in 2022, thanks to over 7,000 units opening up in the eight years up till 2022. This reinforces the fact that the largest pizza chains in the world are based in the U.S. Pizza Hut, one of the biggest pizza brands in the world, is the oldest one, which was founded back in 1958 in Kansas, USA.
What’s Cooking in the Industry?
Within the frozen pizza segment, meat toppings dominate the market as it has a share of 56% in sales, while vegetable toppings have a share of 26%. In contrast, cheese toppings are also competing nicely, as it has a 14% share, as reported by media.market.us. DiGiorno, Red Baron, and Totino’s Party Pizza are the top frozen pizza brands with the greatest brand awareness.
The recent trends in the pizza market include rising demand for vegan pizzas (frozen or otherwise); this evolving market of pizza has got is on a roll, as new demands keep popping up for cheese substitutes, all sorts of pepperoni, Mexican style meats like Birria and chorizo, and new topping varieties
What’s new in the industry is the rapid acceleration of technology use in the context of operators, as a survey shows that 748 pizza makers in the U.S. find online ordering the new go-to way of consuming pizzas and that 78.21% of the producers are investing in a great deal to up their brand presence across the internet. The optimism is on the high side as well amongst the pizza makers as most believe in sales growth in the next twelve months.
Thus, certainly, the pizza market is one to grow indefinitely (or at least it should), and hence, to capitalize on this growth, one must know the best pizza stock to buy. So, let’s move on to our list of 9 Best Pizza Stocks to Buy Now.
Methodology
To curate our list of 9 Best Pizza Stocks to Buy Now, we gathered a list of all companies with a significant presence in the pizza industry and related industries of cheese and flour. We then further narrowed them down on the basis of various metrics like institutional ownership, the number of analysts watching the stock, and the overall financial health of respective stocks. We ranked the finest remaining companies by the number of hedge funds that had stake in them as of Q2, 2024.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A closeup of an assembly line worker inspecting a newly produced jar of condiments and sauces.
The Kraft Heinz Company (NASDAQ:KHC)
Number of Hedge Fund Holders: 43
Upside Potential: 9.70%
The Kraft Heinz Company (NASDAQ:KHC), which is one of the biggest food and beverage producers in North America, has cheese, pizza, dough, sauces, and a whole other lot of products in its product portfolio.
In the 2nd quarter of 2024, The Kraft Heinz Company (NASDAQ:KHC) saw a 3.6% fall in net sales to $6.5 billion, attributed to a negative 1% impact of foreign currency, and 0.2% from divestitures. Pricing and volume mix had an impact on organic sales which fell by 2.4%; prices were up by 1%, but the volume fell by 3.4%, especially in North America and the international market, wherein the consumer sentiment was down; however, the emerging market saw a positive change.
On the other hand, non-cash impairment losses worth $854 million resulted in a dramatic fall of 62.1% in operating income, taking it to $0.5 billion. Adjusted operating income, however, saw an uptick of 2% from the same quarter of 2023, resulting in an adjusted operating income of $1.4 billion, which was an outcome of lower costs and efficient pricing. Also, adjusted EPS experienced a decrease of only 1.3% to $0.78 per share, whereas non-adjusted EPS fell by 90.1% because of massive impairment loss; this reduction in a decrease on an adjusted basis was because of tax benefits carried forward from last year and higher adjusted operating income.
The higher adjusted operating income and robust working capital flow (predominately accounts payable and inventory) resulted in an 8.1% increase in the net cash of the company to $1.7 billion from the same quarter in 2023; free cash flow, on the other hand, stood at $1.2 billion.
While the company has posted a full-year adjusted EPS guidance, wherein it expects 1%-3% growth in its adjusted earnings, the company has lowered its organic net sales guidance, now expecting it to remain flat in 2024, as compared to 2023.
Thus, strong cash flow generation and cost efficiency are aspects that compel one to believe in the outlook of the stock predicted by the analysts: 16 analysts are expecting earnings per share (EPS) of $0.75 and $0.81 per share in the third and fourth quarters, respectively.
As such, 43 hedge funds are bullish on the stock as of Q2 2024, while institutional ownership represents 54% of the company’s shareholding. The stock has an upside potential of 9.7% according to 20 analysts.
Overall KHC ranks 3rd on our list of the best pizza stocks to buy. While we acknowledge the potential of KHC as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than KHC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.