Kraft Heinz Vs. Restaurant Brands: The Technical Showdown Ahead Of Q4 Earnings

As we approach the fourth-quarter earnings season, two prominent food and beverage companies, Kraft Heinz (KHC) and Restaurant Brands International (QSR), are set to report their financial performance. While both companies operate in the same sector, their recent performance and market sentiment have diverged significantly. Let's delve into the key factors driving their performance and the technical indicators that paint a contrasting picture for these two stocks.

Kraft Heinz: Battling Bears & Resistance

Kraft Heinz has had a challenging year, with its stock down 19.09% over the past year and 4.39% year-to-date. Trading at $29.43, the stock is below its five, 20, and 50-day exponential moving averages, signaling a strong bearish trend. The eight-day and 20-day simple moving averages (SMAs) are at $29.14 and $29.27, respectively, with the stock trading above them, suggesting short-term strength. However, the stock's MACD (moving average convergence/divergence) of a negative 0.28 indicates bearish sentiment. KHC stock also trades below its 50-day SMA of $30.15 and its 200-day SMA of $33.34, with its RSI (relative strength index) of 48.56 hints at neutral conditions. Any dip in RSI from here towards oversold conditions under 30 could set the stage for a possible rebound if earnings surprise positively.

Wall Street expects fourth-quarter earnings of 78 cents per share and $6.67 billion in revenue, per data. The ongoing struggles in the consumer environment and persistent inflation concerns have dampened consumer sentiment and increased the focus on value-seeking, leading to weak volume performance for Kraft Heinz over the past few quarters. Volatile currency movements have also been a concern for the company. For the full year 2024, organic net sales are expected to be at the lower end of the down 2% to flat year-over-year range, which raises concerns over the quarter under review. For the fourth quarter of 2024, our model suggests organic sales decline of 2.1%, with volumes expected to be down 3.1% and pricing up 1.1%. Kraft Heinz has been implementing effective pricing strategies, which have been offering respite amid inflationary pressures. Focus on three key pillars — Foodservice, Emerging Markets and U.S. Retail Grow platforms, has also been working well. Apart from this, Kraft Heinz is likely to have gained from innovation. On its third-quarter 2024 earnings call, management highlighted that year to date, innovation as a percentage of organic net sales reached 2.8%, marking a 100 bps increase from 2023.



Restaurant Brands: Riding The Bullish Wave

Restaurant Brands, the parent company of Tim Hortons and Burger King, is enjoying a more bullish outlook. Trading at $66.13, QSR stock is above its five, 20, and 50-day exponential moving averages, indicating strong buying pressure. The eight-day SMA of $63.58 and 20-day SMA of $62.25 signal further upward momentum, although the 200-day SMA at $69.00 presents resistance. With an RSI of 66.44, QSR is nearing overbought levels, signaling caution. Wall Street expects fourth-quarter earnings of 79 cents per share and $2.27 billion in revenue, per data. Restaurant Brands' brands, such as Tim Hortons, Burger King, Popeyes, and Firehouse Subs, have been performing well, with strong same-store sales growth. For instance, Tim Hortons' same-store sales increased 8.4% in the quarter, topping StreetAccount estimates of 4.7%. Burger King's U.S. business has been implementing a turnaround plan that includes remodeling restaurants and spending more money on advertising. This strategy has been working, with the chain's U.S. locations seeing traffic growth for the quarter. Restaurant Brands recently acquired Burger King's largest U.S. franchisee, Carrols Restaurant Group, in a $1 billion deal to help the chain renovate locations even faster. This acquisition is expected to drive growth and improve the overall performance of the Burger King brand.

Investor Takeaways

Kraft Heinz faces a fight against bearish trends, but a strong earnings report could spark a rebound. Investors should watch for signs of a pullback before jumping in. Restaurant Brands is riding high but may hit resistance—investors should watch for signs of a pullback before jumping in. As we await the earnings reports from both companies, it's essential to stay informed about the key factors driving their performance and the technical indicators that paint a contrasting picture for these two stocks. By doing so, investors can make more informed decisions and capitalize on potential opportunities in the market.