Packaged food companies experienced a spike in demand when the pandemic triggered shelter-at-home orders earlier this year. With the gradual reopening of restaurants and fast-food chains, the growth rate for packaged food sales has moderated but the demand continues to be strong compared to pre-pandemic levels as many consumers are opting for home-cooked and packaged food due to COVID-19 fears.With this in mind, we will place consumer staples companies Kraft Heinz and General Mills alongside each other and use the TipRanks Stock Comparison tool to assess which stock offers a more compelling investment opportunity.Kraft Heinz (KHC)Kraft Heinz has been struggling to thrive due to lack of innovation, consumers’ preference for healthier foods and competition from private brands. In recent times, the company has booked huge impairment losses related to several brands and businesses. Last year, investors were further disappointed with the news of an SEC investigation into the company’s accounting practices.However, the pandemic stimulated demand for Kraft Heinz’s products with 2Q revenue rising 3.8% Y/Y to $6.65 billion on a reported basis and 7.4% on an organic basis. Adjusted EPS increased 2.6% to $0.80. But, the company posted a loss per share of $1.35 on a reported basis in 2Q reflecting the goodwill impairment charge of $1.8 billion and intangible asset impairment charges of $1.1 billion.Recently, Kraft Heinz revealed its strategic transformation plan. Under the new growth plan, the company aims to strengthen its partnerships and increase its marketing spend by 30%. Kraft Heinz expects its ongoing turnaround to help in generating organic sales growth of 1% to 2% and adjusted EPS growth of 4% to 6% in the long-term. It aims to deliver gross productivity efficiencies of $2 billion through 2024 to offset inflation and direct these savings to investments that will support growth initiatives.As part of its decision to focus on high-growth businesses, the company announced the sale of its natural, grated, cultured and specialty cheese businesses in the US, grated cheese business in Canada, and the entire international cheese business outside these two markets to Groupe Lactalis for $3.2 billion. The cheese businesses being sold generated $1.8 billion sales in the 12-months ended June 27. The company expects to use the sale proceeds to bring down its debt as part of its goal to reduce its leverage to below 4x consistently.Following KHC’s Investor Day event, Guggenheim analyst Laurent Grandet upgraded Kraft Heinz to Hold from Sell and raised the price target to $34 from $30. In a research note to investors, the analyst highlighted the company’s initiatives to reinvigorate its brands and other strategic efforts.The analyst stated, “In addition, the announced divestiture of the natural cheese business is a first step in the right direction to improve the balance sheet. We are changing our EPS estimates in FY20 / FY21 / FY22 to $2.70 / $2.27 / $2.34 (prev $2.50 / no change / $2.42).” (See KHC stock analysis on TipRanks)Overall, the Street has a Moderate Buy consensus for Kraft Heinz with 7 Buys, 8 Holds and 1 Sell. The stock has fallen 2.8% year-to-date but has an upside potential of about 16% to the current levels as indicated by the average analyst price target of $36.19.General Mills (GIS)General Mills sells over 100 brands across the world, including eight brands that generate over $1 billion in annual retail sales. These eight brands include Pillsbury, Betty Crocker, Nature Valley, Yoplait, Cheerios, Blue Buffalo, Old El Paso and Häagen-Dazs.Like many of its peers, General Mills was also under pressure due to a shift in consumer preference to organic and healthier food and increasing rivalry from private labels. However, continued innovation and the 2018 acquisition of premium-pet food maker Blue Buffalo helped the company thrive in a challenging business environment.At-home food demand helped General Mills deliver better-than-expected numbers for the first quarter of fiscal 2021, which ended Aug. 30. Fiscal 1Q revenue grew 9% Y/Y to $4.36 billion despite lower demand from the away-from-home channels, though household penetration continued to be strong. Strong sales, significant margin expansion and higher earnings from joint ventures drove a 26.6% rise in the adjusted EPS to $1.00.The company stated that the demand in the at-home channel had moderated in fiscal 1Q compared to the sequentially prior quarter. However, it expects at-home food demand to remain elevated in fiscal 2Q compared to pre-COVID-19 levels.Meanwhile, General Mills continues to innovate products based on evolving consumer tastes. Recent introductions include Cinnamon Cheerios, Yoplait Go-Gurt Slushie yogurts with fizzing texture, and a new line of keto-friendly products including Ratio bars. To boost its sales, the company also intends to make continued investments in brands, data and analytics and e-commerce.Through its Holistic Margin Management program, General Mills expects to deliver cost savings at 4% of its cost of goods sold. It also aims to reduce its leverage and end the current fiscal year with a net debt-to-trailing 12-month adjusted EBITDA ratio below 3.2x. (See GIS stock analysis on TipRanks)Following GIS’s 1Q results, Credit Suisse analyst Robert Moskow upgraded General Mills to Buy from Hold and raised the price target to $67 from $65. Moskow believes that the company is in a better position to retain consumers who tried its brands during the pandemic than its competitors.The rest of the Street has a cautiously optimistic Moderate Buy consensus for General Mills with 3 Buys versus 5 Holds and no Sells. General Mills stock has already advanced 14.6% so far in 2020 and the average analyst price target of $66.63 indicates an upside potential of 8.5% ahead.ConclusionGeneral Mills has a dividend yield of 3.26%. Following its 1Q results, the company raised its quarterly dividend by 4% to $0.51 per share (dividend will be payable on Nov. 2). Comparatively, Kraft Heinz has a higher dividend yield of 5.16%.Kraft Heinz’s newly set strategic plans and operational goals have revived the Street’s interest in the stock. Currently, 44% of analysts covering Kraft Heinz stock have a Buy rating compared to 38% in the case of General Mills. Also, attractive dividend yield and higher upside potential make Kraft Heinz stock a better pick than General Mills right now.To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment More recent articles from Smarter Analyst: * GenMark Pops 13% On Very Strong 3Q, FDA Emergency Clearance * CareDx Soars 15% As 3Q Revenue Outlook Surpasses Estimates * McDonald’s Reports 3Q Global Comps Beat; Analyst Boosts PT * Domino’s Pizza Slips 7% On 3Q EPS Miss,
Packaged food companies experienced a spike in demand when the pandemic triggered shelter-at-home orders earlier this year. With the gradual reopening of restaurants and fast-food chains, the growth rate for packaged food sales has moderated but the demand continues to be strong compared to pre-pandemic levels as many consumers are opting for home-cooked and packaged food due to COVID-19 fears.With this in mind, we will place consumer staples companies Kraft Heinz and General Mills alongside each other and use the TipRanks Stock Comparison tool to assess which stock offers a more compelling investment opportunity.Kraft Heinz (KHC)Kraft Heinz has been struggling to thrive due to lack of innovation, consumers’ preference for healthier foods and competition from private brands. In recent times, the company has booked huge impairment losses related to several brands and businesses. Last year, investors were further disappointed with the news of an SEC investigation into the company’s accounting practices.However, the pandemic stimulated demand for Kraft Heinz’s products with 2Q revenue rising 3.8% Y/Y to $6.65 billion on a reported basis and 7.4% on an organic basis. Adjusted EPS increased 2.6% to $0.80. But, the company posted a loss per share of $1.35 on a reported basis in 2Q reflecting the goodwill impairment charge of $1.8 billion and intangible asset impairment charges of $1.1 billion.Recently, Kraft Heinz revealed its strategic transformation plan. Under the new growth plan, the company aims to strengthen its partnerships and increase its marketing spend by 30%. Kraft Heinz expects its ongoing turnaround to help in generating organic sales growth of 1% to 2% and adjusted EPS growth of 4% to 6% in the long-term. It aims to deliver gross productivity efficiencies of $2 billion through 2024 to offset inflation and direct these savings to investments that will support growth initiatives.As part of its decision to focus on high-growth businesses, the company announced the sale of its natural, grated, cultured and specialty cheese businesses in the US, grated cheese business in Canada, and the entire international cheese business outside these two markets to Groupe Lactalis for $3.2 billion. The cheese businesses being sold generated $1.8 billion sales in the 12-months ended June 27. The company expects to use the sale proceeds to bring down its debt as part of its goal to reduce its leverage to below 4x consistently.Following KHC’s Investor Day event, Guggenheim analyst Laurent Grandet upgraded Kraft Heinz to Hold from Sell and raised the price target to $34 from $30. In a research note to investors, the analyst highlighted the company’s initiatives to reinvigorate its brands and other strategic efforts.The analyst stated, “In addition, the announced divestiture of the natural cheese business is a first step in the right direction to improve the balance sheet. We are changing our EPS estimates in FY20 / FY21 / FY22 to $2.70 / $2.27 / $2.34 (prev $2.50 / no change / $2.42).” (See KHC stock analysis on TipRanks)Overall, the Street has a Moderate Buy consensus for Kraft Heinz with 7 Buys, 8 Holds and 1 Sell. The stock has fallen 2.8% year-to-date but has an upside potential of about 16% to the current levels as indicated by the average analyst price target of $36.19.General Mills (GIS)General Mills sells over 100 brands across the world, including eight brands that generate over $1 billion in annual retail sales. These eight brands include Pillsbury, Betty Crocker, Nature Valley, Yoplait, Cheerios, Blue Buffalo, Old El Paso and Häagen-Dazs.Like many of its peers, General Mills was also under pressure due to a shift in consumer preference to organic and healthier food and increasing rivalry from private labels. However, continued innovation and the 2018 acquisition of premium-pet food maker Blue Buffalo helped the company thrive in a challenging business environment.At-home food demand helped General Mills deliver better-than-expected numbers for the first quarter of fiscal 2021, which ended Aug. 30. Fiscal 1Q revenue grew 9% Y/Y to $4.36 billion despite lower demand from the away-from-home channels, though household penetration continued to be strong. Strong sales, significant margin expansion and higher earnings from joint ventures drove a 26.6% rise in the adjusted EPS to $1.00.The company stated that the demand in the at-home channel had moderated in fiscal 1Q compared to the sequentially prior quarter. However, it expects at-home food demand to remain elevated in fiscal 2Q compared to pre-COVID-19 levels.Meanwhile, General Mills continues to innovate products based on evolving consumer tastes. Recent introductions include Cinnamon Cheerios, Yoplait Go-Gurt Slushie yogurts with fizzing texture, and a new line of keto-friendly products including Ratio bars. To boost its sales, the company also intends to make continued investments in brands, data and analytics and e-commerce.Through its Holistic Margin Management program, General Mills expects to deliver cost savings at 4% of its cost of goods sold. It also aims to reduce its leverage and end the current fiscal year with a net debt-to-trailing 12-month adjusted EBITDA ratio below 3.2x. (See GIS stock analysis on TipRanks)Following GIS’s 1Q results, Credit Suisse analyst Robert Moskow upgraded General Mills to Buy from Hold and raised the price target to $67 from $65. Moskow believes that the company is in a better position to retain consumers who tried its brands during the pandemic than its competitors.The rest of the Street has a cautiously optimistic Moderate Buy consensus for General Mills with 3 Buys versus 5 Holds and no Sells. General Mills stock has already advanced 14.6% so far in 2020 and the average analyst price target of $66.63 indicates an upside potential of 8.5% ahead.ConclusionGeneral Mills has a dividend yield of 3.26%. Following its 1Q results, the company raised its quarterly dividend by 4% to $0.51 per share (dividend will be payable on Nov. 2). Comparatively, Kraft Heinz has a higher dividend yield of 5.16%.Kraft Heinz’s newly set strategic plans and operational goals have revived the Street’s interest in the stock. Currently, 44% of analysts covering Kraft Heinz stock have a Buy rating compared to 38% in the case of General Mills. Also, attractive dividend yield and higher upside potential make Kraft Heinz stock a better pick than General Mills right now.To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment More recent articles from Smarter Analyst: * GenMark Pops 13% On Very Strong 3Q, FDA Emergency Clearance * CareDx Soars 15% As 3Q Revenue Outlook Surpasses Estimates * McDonald’s Reports 3Q Global Comps Beat; Analyst Boosts PT * Domino’s Pizza Slips 7% On 3Q EPS Miss
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