Last update on 2024-06-05

Kraft Heinz (KHC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Kraft Heinz (KHC) Piotroski F-Score for 2023: Final score 7/9, analyzing profitability, liquidity, and efficiency. Strong investment signal.

Short Analysis - Piotroski Score: 7

We're running Kraft Heinz (KHC) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a concise, 9-point scoring system to assess a company's financial health across profitability, liquidity, and operating efficiency. Kraft Heinz Company (KHC) scores 7 out of 9, indicating strong financials. Specifically, KHC is profitable with a positive net income and cash flow, a growing ROA, a higher operating cash flow than net income, an increasing Current Ratio, an improving Gross Margin, and a rising Asset Turnover ratio. However, the company struggles with slightly increased leverage and a minor rise in shares outstanding, hence scoring 0 in those areas.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 7, Kraft Heinz shows strong potential as an investment, particularly for those interested in a company with good profitability and efficient operations. The slight increases in leverage and share dilution are areas to monitor but aren't immediate red flags. Therefore, Kraft Heinz could be worth considering for investors seeking stable and improving financial performance.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Kraft Heinz (KHC)

Company has a positive net income?

Net income is the sum of all revenues plus gains, minus all expenses and losses. Positive net income indicates profitability.

In 2023, Kraft Heinz (KHC) reported a net income of $2,855,000,000. This is a significant improvement compared to some previous years, particularly 2018, when the company reported a massive net loss of $10,192,000,000. This positive net income in 2023 signifies that KHC is profitable and effectively managing its revenues and expenses. Over the last 20 years, the net income trend for KHC shows some volatility, especially around 2018, but recent figures suggest a return to stronger financial health.

Company has a positive cash flow?

The criterion is to check if the Cash Flow from Operations (CFO) for Kraft Heinz in 2023 is positive or negative, with a positive value yielding 1 point in the Piotroski analysis.

The Cash Flow from Operations (CFO) for 2023 is $3.976 billion, which is positive. This is a good indicator for the company's financial health as it suggests that Kraft Heinz is generating ample cash from its core operating activities. Reviewing the historical data, Kraft Heinz has generally maintained positive operating cash flows over the past 20 years, despite fluctuations. Notably, in 2019, the CFO was even higher at approximately $3.552 billion. Consistently positive cash flows underline effective management and operational efficiency. Therefore, Kraft Heinz earns 1 point for this criterion.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is a key metric to assess a company's ability to generate profit from its assets. An increasing ROA indicates improved efficiency.

Kraft Heinz (KHC) showed an increase in its ROA from 0.0257 in 2022 to 0.0316 in 2023. This upward trend is favorable, especially considering their industry median ROA is much higher at 0.282 in 2023. Although KHC's ROA still lags behind the industry median, the positive change marks an improvement in asset utilization, which is good for the company's financial health.

Operating Cashflow are higher than Netincome?

A higher operating cash flow compared to net income is a good indicator because it shows better cash generation and quality of earnings.

In 2023, Kraft Heinz (KHC) reported an operating cash flow of $3,976 million, which is significantly higher than its net income of $2,855 million. This trend is favorable as it indicates strong cash generation and suggests that the company's earnings are of high quality. Over the past 20 years, the operating cash flow has generally been robust, especially when compared to the often more volatile net income, demonstrating consistent operational efficiency and financial health. Therefore, this criteria yields a positive score of 1 point.

Liquidity of Kraft Heinz (KHC)

Leverage is declining?

Change in leverage measures the change in a company's financial risk by comparing the debt-to-assets ratio over a specified period. Lower leverage is generally favorable as it indicates reduced financial risk.

For Kraft Heinz (KHC), the leverage ratio has increased slightly from 0.2125 in 2022 to 0.2147 in 2023. This increase in leverage implies a marginal rise in financial risk. Analyzing the historical leverage over the last 20 years, KHC's leverage ratio has fluctuated significantly. This trend of increasing leverage in 2023 adds to concerns, resulting in 0 points according to the Piotroski F-score metric.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio signals better liquidity.

In 2023, Kraft Heinz (KHC) exhibits a Current Ratio of 0.9866, a rise from 0.8747 in 2022. This uptick indicates an improvement in liquidity, earning a point for this criterion. Yet, it remains below the industry median of 1.6315, highlighting room for improvement despite the positive trend.

Number of shares not diluted?

Change in shares outstanding indicates whether the company is issuing new shares or buying back shares, which affects shareholder value.

The outstanding shares for Kraft Heinz (KHC) increased from 1,226,000,000 shares in 2022 to 1,227,000,000 shares in 2023. This represents a slight increase of 1,000,000 shares, which corresponds to a 0.08% rise. Notably, this minor change suggests that there hasn't been significant dilution or buyback activity within the last year, implying a relatively stable approach to capital structure. With the overall outstanding shares rising, we set this criterion to 0 as per the Piotroski score framework, since an increase typically implies dilution.

Operating of Kraft Heinz (KHC)

Cross Margin is growing?

The change in Gross Margin criterion assesses whether a company’s efficiency in producing goods or services has improved. An increase suggests better control over costs while maintaining revenue, leading to potentially higher profits.

In 2023, Kraft Heinz (KHC) reported a Gross Margin of 0.3351, up from 0.3067 in 2022. This positive shift is significant. Compared to the Gross Margin's trend over the past 20 years, the 2023 margin marks a recovery from lows of 0.2661 in 2014, although it hasn't reached the highs of over 0.39 seen in earlier years. Importantly, KHC’s 2023 margin outpaces the industry median of 0.282, emphasizing its competitive edge. Thus, the improvement in Gross Margin by 0.0284 points in 2023 earns Kraft Heinz 1 point in the Piotroski analysis. This trend reflects good cost management and a potential boost in profitability amidst challenging industry conditions.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales.

In 2023, Kraft Heinz (KHC) reported an Asset Turnover ratio of 0.2946, up from 0.288 in 2022. This positive change suggests improved efficiency in asset utilization, a notable trend considering the company's historical decline in asset turnover, particularly post-2015. This increase adds a point to the overall assessment.