Kraft Heinz said it would buy back as much as $3 billion of stock over the next three years.
The Pittsburgh food-and-beverage giant (KHC) -) said it would fund the purchases with cash that's available after it provides for what it called "disciplined" capital spending and "attractive" dividend payments, keeps debt at target levels, and evaluates deals including acquisitions, divestitures and partnerships.
The shares present “an attractive investment opportunity,” Chairman and Chief Executive Miguel Patricio said in a statement.
The company said that it would buy the stock on the open market, through private transactions, in deals structured via investment banks, or other means.
Stock buyback 'positive for holders': TD Cowen
In an investment brief, TD Cowen analysts Robert Moskow, Jacob Aiken-Phillips and Jacob Henry said they were optimistic about the program.
They estimated that the buyback could reduce Kraft Heinz's share count by 6.5% over the three years.
They view the proposal as "positive for shareholders and a good use of capital, especially given the stock's below average valuation multiple," the analysts said.
On a trailing 12-month basis the stock is trading at about 14.5 times earnings. The dividend yields almost 4.6%.
Management is confident that Kraft Heinz can deliver sales increases of 2% to 3% and earnings increases of 6% to 8% in 2024 “despite weak U.S. retail-sales trends,” the analysts said in their brief.
The analyst consensus for KHC’s 2024 is currently up 1% in sales and 2% in earnings, they said.
At last check on the Nasdaq, the stock was trading up 0.4%, just above $35. The stock's 52-week high is $42.80, set Jan. 9.
The TD Cowen analysts currently rate Kraft Heinz market perform with a $33 price target.
In mid-August Kraft Heinz named Carlos Abrams-Rivera its new CEO, effective Jan. 1. He'd been executive vice president at the parent and president of the company's North America zone. When Abrams-Rivera takes the helm, Patricio will become nonexecutive chairman.
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