How High Can H.J. Heinz Fly?

Shares of H.J. Heinz (NYS: HNZ) hit a 52-week high today. Let's look at how it got here and whether clear skies are ahead.

How it got here
A day before H.J. Heinz reports fiscal first-quarter results, the market is pushing the stock to a new high. The latest driver is the company's bullish statement at the shareholders meeting, a day before quarterly results are due.

Heinz's chairman said organic growth is expected to be nearly 5%, net income grew 10%, and earnings per share were $0.87. Since analysts were expecting a slight decline in revenue and earnings per share of just $0.80, the news is helping drive the stock to a new high.


This isn't the only consumer staple reaching a new high, either. Consumer goods have had a slow and steady recovery since the depths of the recession and Unilever (NYS: UL) and Kraft Foods (NAS: KFT) show the same steady rise as Heinz.

HNZ Chart

HNZ data by YCharts

From a fundamental standpoint, the stock looks strong compared to other consumer staple companies, and the better-than-expected first quarter will only bolster than position.

Company

Price/Book

Quarterly Revenue Growth

Return on Assets

Forward P/E

H.J. Heinz 6.6 5.6% 8.7% 15.3
Hillshire Brands (NYS: HSH) 1.4 2.1% 6.2% 16.7
Unilever 5.7 11.5% 9.1% 16.0
Kraft Foods 2.1 (4.3%) 4.8% 15.1

Source: Yahoo! Finance.

Hillshire Brands has a better valuation from a book value perspective, but Heinz is strong across the board when stacked up against these companies. The only question is whether Heinz can keep moving higher.

What's next?
Consumer goods companies are growing steadily, but the pace of growth is anything but spectacular. This will put a limit on the amount these stocks can rise in the coming year. I think Heinz can continue to move higher, but I would look at this more as a dividend play rather than a stock that will move very much. Heinz pays a 3.6% dividend yield, which is very attractive in the current economic doldrums.

The CAPS community thinks the stock can outperform, giving it our highest rating of five stars. Out of 276 All-Stars, 268 have predicted that the stock will outperform, a very bullish sentiment.

Interested in reading more about H.J. Heinz? Click here to add it to My Watchlist, which will find all of our Foolish analysis on this stock.

The article How High Can H.J. Heinz Fly? originally appeared on Fool.com.

Fool contributor Travis Hoium enjoys ketchup as much as the next guy, but does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Motley Fool newsletter services have recommended buying shares of Unilever and H.J. Heinz. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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