August 12, 2011

H.J. Heinz Co. (HNZ)

• Editor's Pick

Written By Benjamin Shepherd

“H.J. Heinz Co. (HNZ – yield 3.80%) grew profits by 14% in its 2011 fiscal year ended April 30 to a record $990 million, on the back of strong sales in emerging markets. Revenue came in at a record $10.7 billion for a 2% year-over-year gain. … Emerging markets accounted for 17% of the company’s $2.89 billion fourth-quarter sales. This number is expected to grow to 20% in the 2012 fiscal year and 30% by 2016. In the last fiscal year, the company completed acquisitions in China and Brazil. 

“Heinz in November acquired Chinese soy sauce maker Foodstar and the results are encouraging. In the 12 months before the acquisition, Foodstar grew sales at an annual rate of 12%. Six months after the acquisition, Foodstar’s sales growth has accelerated to 22%. The acquisition of an 80% stake in Brazil’s Coniexpress S.A. Industrias Alimenticias, maker of the popular Quero brand of tomato and vegetable products, gives Heinz access to a sales organization that covers 150,000 stores in the country that will host the 2014 World Cup and the 2016 Olympic Games. Heinz has targeted $500 million in sales from Brazil by 2014. … With most income-paying companies, the dividend policy is the best barometer of management’s confidence in future business. Heinz recently raised its dividend by 7% to $1.92; the firm has grown its dividend by almost 80% since its 2004 fiscal year. Investors run the risk that much of the good news may already be priced into the stock. But Heinz’s aggressive expansion in growth markets bodes well for the company’s long-term future.”

Benjamin Shepherd & Peter Staas, Louis Rukeyser’s Wall Street, 8/11

This excerpt is only a portion of Louis Rukeyser’s Wall Street’s recommendation of HNZ. For the full writeup, consider a subscription to Louis Rukeyser’s Wall Street.