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Beyond Meat vs. Kraft Heinz: What to Pick?

As people increasingly move towards a plant-based diet, there is rising adoption of plant-based food products, including meat alternatives.

According to a ResearchandMarkets report, the global plant-based meat market is expected to be worth $13.3 billion this year, compared to $11.9 billion last year, and is expected to grow to $20.78 billion by 2025.

Using the TipRanks Stock Comparison tool, let’s compare the plant-based meat company, Beyond Meat (BYND), with The Kraft Heinz Company (KHC), and see how Wall Street analysts feel about these stocks.

I am neutral about both stocks mentioned in the article.

Beyond Meat

Beyond Meat is a plant-based meat provider. Its flagship product is the Beyond Burger. The company distributes its products through retail channels like grocery and convenience stores, and foodservice channels like restaurants.

The company reported mixed second-quarter results, with a wider-than-expected loss and revenue beat. BYND posted Q2 revenues of $149.43 million, a jump of 31.8% year-over-year, outpacing the Street’s estimate of $142.62 million.

Net loss in Q2 widened to $0.31 per share, from a loss of $0.16 per share in the same quarter last year. This net loss per share was higher than analysts’ estimates of a loss of $0.23 per share.

In Q3, BYND anticipates net revenues in the range of $120 million to $140 million, a rise of 27% to 48% year-over-year. The company stated that while it continues to expect a recovery in foodservice channels, the outlook also assumes “reasonable containment of COVID-19 infection rates both in the U.S. and abroad.”

Earlier this month, McDonald’s (MCD) launched the McPlant, a plant-based sandwich in the U.K. and Ireland as part of its three-year strategic agreement with Beyond Meat.

BYND has entered into such strategic agreements with other companies, including PepsiCo (PEP) and Yum! Brands (YUM) in order to reach more consumers through its plant-based meat products. (See Beyond Meat stock charts on TipRanks)

Following the news, BTIG analyst Peter Saleh remained neutral, with a Hold rating, on the stock as he awaits more evidence of widespread adoption of the McPlant. Saleh doesn’t expect meaningful revenue contributions from the product.

The analyst added that conversation with the company’s management indicated that while BYND intended for a national rollout of the McPlant range of menu items, it was not guaranteed.

The analyst concluded that while the company has a “strong brand awareness,” and the adoption of plant-based proteins among consumers is rising, there is also “prolonged weakness in the foodservice channel, increased competition, and heightened valuation.”

Turning to the rest of the Street, analysts are cautiously bearish on Beyond Meat, with a Moderate Sell consensus rating, based on five Holds and two Sells.

The average Beyond Meat price target of $108.50 implies 3.9% downside potential from current levels.

The Kraft Heinz Company

Kraft Heinz’ product categories include: Condiments and Sauces, Cheese and Dairy, Ambient Foods, Frozen Foods, and Meat and Seafood Products.

Earlier this month, the company had to pay a fine of $62 million to the Securities and Exchange Commission (SEC) to settle charges of “bogus cost savings” worth $200 million.

The company denied any guilt, and commented, “The impact of the 59 transactions at issue in the Order did not affect the Company’s reported adjusted EBITDA by more than 1 percent in any reporting period.”

Currently, the company is in the process of divesting some of its assets. Earlier this year, the company entered into an agreement with Hormel Foods (HRL) to sell certain assets in its nuts businesses for $3.4 billion.

Kraft Heinz has also entered into a deal worth $3.3 billion to sell certain assets of its Cheese and Dairy business to Groupe Lactalis, and plans to close the deal in the second half of this year.

In Q2, the company’s net sales declined 0.5% year-over-year to $6.6 billion. However, it beat the consensus estimate of $6.53 billion. (See Kraft-Heinz stock charts on TipRanks)

KHC’s adjusted earnings came in at $0.78 per share, easily outpacing consensus estimates of $0.72, but was down 2.5% compared to the prior-year quarter. The decline was primarily related to a 5.2% fall in adjusted EBITDA, which came in at $1.7 billion.

The company has projected 2021 adjusted EBITDA to come in ahead of 2019 levels. Additionally, the company expects Q3 organic net sales to increase by a mid-single-digit percentage.

Two months ago, Jeffries analyst Robert Dickerson reiterated a Hold rating on the stock, and lowered his price target from $41 to $40 (10% upside) on the stock.

Dickerson is of the view that the company’s margins in the second half of the year will be under pressure from “inflated costs and pricing timing combined with divestment-driven consensus revision risk outstanding for a company that’s lapping elevated food consumption and low promotional activity.”

Wall Street analysts are generally sidelined on the stock, with a Hold rating based on one Buy, six Holds, and one Sell.

The average Kraft Heinz price target of $39.38 implies 8.2% upside potential from current levels.

Bottom Line

While analysts are cautiously bearish about BYND, they are sidelined about Kraft Heinz.

Disclosure: At the time of publication, Shrilekha Pethe did not have a position in any of the securities mentioned in this article​.

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