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Topic: Value Stocks

Heinz aims to uncover its hidden value

H.J. HEINZ COMPANY $40 (New York symbol HNZ; WSSF Rating: Above average) has sold its New Zealand poultry-processing business for $165 million, which is about 24% more than the $133.2 million or $0.39 a share that the company earned from continuing operations in its third fiscal quarter ended January 31, 2006.

This is one of several sales of overseas assets that the company has carried out since last year. It wants to focus on the three businesses where it has a leading market position: ketchup and sauces; meals and snack foods; and infant foods.

Heinz still has several smaller operations it wants to sell, but it has now completed most of its planned asset sales. It has also cut its manufacturing facilities by 15%, and shrunk the number of products it makes.

The stock now trades at 18.8 times the $2.13 a share, excluding unusual items, it will probably earn in fiscal 2006. That’s reasonable, especially Heinz’s new focus on its strongest brands could let the company generate far more profit than it has recently. Meanwhile, its $1.20 dividend yields 3.0%.

Heinz is a buy.

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