Financial Analysis: Kraft Heinz (NASDAQ:KHC) vs. McCormick & Company, Incorporated (MKC)

Kraft Heinz (NASDAQ: KHC) and McCormick & Company, Incorporated (NYSE:MKC) are both large-cap consumer staples companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitability and dividends.

Valuation & Earnings

This table compares Kraft Heinz and McCormick & Company, Incorporated’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Kraft Heinz $26.49 billion 3.56 $3.63 billion $3.21 24.10
McCormick & Company, Incorporated $4.41 billion 3.00 $472.30 million $3.62 27.90

Kraft Heinz has higher revenue and earnings than McCormick & Company, Incorporated. Kraft Heinz is trading at a lower price-to-earnings ratio than McCormick & Company, Incorporated, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Kraft Heinz has a beta of 0.45, indicating that its share price is 55% less volatile than the S&P 500. Comparatively, McCormick & Company, Incorporated has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500.

Dividends

Kraft Heinz pays an annual dividend of $2.50 per share and has a dividend yield of 3.2%. McCormick & Company, Incorporated pays an annual dividend of $2.08 per share and has a dividend yield of 2.1%. Kraft Heinz pays out 77.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. McCormick & Company, Incorporated pays out 57.5% of its earnings in the form of a dividend. McCormick & Company, Incorporated has increased its dividend for 31 consecutive years.

Analyst Ratings

This is a summary of current recommendations and price targets for Kraft Heinz and McCormick & Company, Incorporated, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Kraft Heinz 0 4 10 0 2.71
McCormick & Company, Incorporated 0 6 3 0 2.33

Kraft Heinz presently has a consensus target price of $92.54, indicating a potential upside of 19.64%. McCormick & Company, Incorporated has a consensus target price of $105.75, indicating a potential upside of 4.69%. Given Kraft Heinz’s stronger consensus rating and higher probable upside, equities analysts clearly believe Kraft Heinz is more favorable than McCormick & Company, Incorporated.

Profitability

This table compares Kraft Heinz and McCormick & Company, Incorporated’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Kraft Heinz 15.03% 7.49% 3.63%
McCormick & Company, Incorporated 10.05% 26.09% 8.17%

Institutional & Insider Ownership

62.0% of Kraft Heinz shares are held by institutional investors. Comparatively, 76.1% of McCormick & Company, Incorporated shares are held by institutional investors. 26.9% of Kraft Heinz shares are held by company insiders. Comparatively, 15.3% of McCormick & Company, Incorporated shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Kraft Heinz beats McCormick & Company, Incorporated on 9 of the 17 factors compared between the two stocks.

Kraft Heinz Company Profile

The Kraft Heinz Company is a food and beverage company. The Company is engaged in the manufacturing and marketing of food and beverage products, including condiments and sauces, cheese and dairy, meals, meats, refreshment beverages, coffee and other grocery products. The Company’s segments include the United States, Canada and Europe. The Company’s remaining businesses are combined as Rest of World. The Rest of World consists of Latin America and Asia, Middle East and Africa (AMEA). The Company provides products for various occasions whether at home, in restaurants or on the go. The Company’s brands include Heinz, Kraft, Oscar Mayer, Philadelphia, Planters, Velveeta, Lunchables, Maxwell House, Capri Sun, and Ore-Ida. The Company’s products are sold through its own sales organizations and through independent brokers, agents and distributors to chain, wholesale, cooperative and independent grocery accounts, convenience stores, drug stores, value stores, bakeries and pharmacies.

McCormick & Company, Incorporated Company Profile

McCormick & Company, Incorporated is engaged in manufacturing, marketing and distributing spices, seasoning mixes, condiments and other flavorful products to the food industry, including retailers, food manufacturers and foodservice businesses. The Company’s segments include consumer and industrial. The Company is involved in the manufacturing and sales of flavorful products. As of November 30, 2016, it offered brands for consumers in approximately 150 countries and territories. The Company’s brands in the Americas include McCormick, Lawry’s, and Club House, as well as brands, such as Gourmet Garden and OLD BAY. It provides a range of products to food manufacturers and foodservice customers. The Company’s sales, distribution and production facilities are located in North America, Europe and China. It markets regional and ethnic brands, such as Zatarain’s, Stubb’s, Thai Kitchen and Simply Asia. The Company offers sensory testing, culinary research, food safety and flavor application.

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