Kraft Heinz upgraded to 'Outperform' by Bernstein analysts

Kraft Heinz Company (KHC) received an upgrade from Bernstein on Tuesday, with analysts moving the stock from a "Perform" rating up to an "Outperform" rating. Bernstein also raised Kraft Heinz's price target to $40 per share. The upgrade comes as Bernstein expressed optimism about Kraft Heinz's positioning amid the new weight loss drug craze. The analysts believe Kraft Heinz's focus on protein-forward products will allow the company to avoid disruption from the growing appeal of obesity medications.

Yahoo Finance's Brian Sozzi, Seana Smith, and Brad Smith break down all the details of this morning's stock mover.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

SEANA SMITH: Kraft Heinz getting an upgrade this morning from Bernstein. Now, the team there upgrading the stock from perform to outperform. They also raised their price target to 40 bucks a share. You can see the stock opening just below 34 bucks a share.

Now, the company, at least in Bernstein's view, is in a good position compared to peers and also a very cheap valuation. Bernstein also saying that it's not worried about the weight loss drugs impacting the company and their sales considering its protein-forward portfolio. At least that's a take here from Bernstein. We talked about the fact that these weight loss drugs have been weighing on some of these consumer staples names. What are you laughing about, the protein portfolio?

BRIAN SOZZI: Protein-forward portfolio. Look, Kraft Heinz has done some very good work the past two years stripping out costs, realigning its business under now former CEO Miguel Patricio,. New CEO in there Carlos Rivera Abrams doing his thing at the company. He just recently started.

Bottom line is this is a more efficiently well-run company. And there is a compelling case and I think what that's what they're trying to highlight here. Stock is yielding close to 5%, that's dividend yield.

You go on to the Yahoo Finance revamped website, you can see it's trading about 11 times forward earnings. Well below market multiple on a company that I think still has a lot of runway to pull out costs from its business. And they're also driving a lot of invention or reinvention of the core portfolio, rethinking how products should and then also as well how they are marketed to consumers.

BRAD SMITH: I mean, it should be no surprise that there is interest or at least some question around the volume in the meats category for Kraft Heinz. This came up on the call. They talked about, on volume, where there is this drag that meats has presented in this most recent quarter.

And they addressed that to a certain extent, especially within the US business where they're making some significant investments in terms of improving share of shelf, marketing investment, and innovation. I don't know what meat innovation looks like from here. We've already got fake meats out there--

SEANA SMITH: Seen a lot of meat innovation. Yeah, where does it go?

BRAD SMITH: I mean what is next? What is next in meat innovation? I don't know, perhaps--

BRIAN SOZZI: I actually don't have a good answer for you on that. But staying on the topic of meat to make it-- our very own--

BRAD SMITH: If you did, we could start a company.

BRIAN SOZZI: Our very own Brooke DiPalma had an exclusive with Tyson CEO yesterday. That's on the Yahoo Finance home page. And then, you know, that CEO is saying consumers now trading down to chicken from beef. So just continuing my own narrative here this morning that the consumer is not in good shape, that they're now-- they can't afford beef and now they're trading back down the chicken. Is chicken even cheaper?

SEANA SMITH: Chicken is a lot cheaper.

BRIAN SOZZI: It's cheaper.

SEANA SMITH: Yeah, it's a heck of a lot cheaper, so it makes sense, right? You talk about the fact that people, their grocery bills are going up. They're trying to save where they can. I actually do buy chicken sometimes instead of beef because it is. You do save a lot of money when it comes to that, especially some of that higher-end beef prices there.

BRIAN SOZZI: Some savvy shopping by you.

SEANA SMITH: Savvy shopping always, always. I'm very frugal. I'm always looking to save a buck or two.

But obviously, this all comes back to the consumer, what this means here for spending going forward. Kraft, at least in Bernstein's eyes, they think they're well positioned. A lot of that obviously with the valuation.

BRIAN SOZZI: Mac & Cheese is still good.

SEANA SMITH: Mac & Cheese.

BRAD SMITH: OK.

SEANA SMITH: That's another statement.

BRAD SMITH: I don't know about that.

BRIAN SOZZI: All right, take it offline.

BRAD SMITH: You cannot make that statement about Mac & Cheese and it being good from a package when you've got Thanksgiving this close--

BRIAN SOZZI: That's true.

BRAD SMITH: --and we've got fresh mac and cheese--

BRIAN SOZZI: Well, you're a chef. The world doesn't know that about you.

BRAD SMITH: Well, and that's why I'm still cooking beef because it's [INAUDIBLE].