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Stocks B / Berkshire Hathaway
|Subject: Re: Berkshire buys Heinz||Date: 2/14/2013 2:10 PM|
|Author: pauleckler||Number: 198590 of 217050|
If earnings grow 60% in real terms from here, it doesn't really matter
very much how long that takes provided it's certain enough and then sustainable.
The problem is that Heinz is not a growth company. They are an iconic name brand company, but for years they have been going through reorganizations intended to grow earnings. But the market is saturated. International growth is problematic. Meanwhile costs are rising. Brand loyalty probably lets them keep up with costs, but there is then the threat of generics and discounters.
They sold their private label soup business a few years ago to improve margins.
They will be lucky to grow earnings at the rate of population growth. Analysts have been complaining about their low growth rate for years.
Buffett likes the return on assets. Growth will not be easy. Cost cutting and raising prices has been their "growth" mantra for years.
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