What's moving markets today
Kraft Heinz (KHC) shares lost more than a quarter of their value Friday following the shocking news of a big writedown and an accounting probe by the SEC. But nobody is feeling the pain of this Velveeta-esque meltdown more than the Oracle of Omaha.
Warren Buffett's Berkshire Hathaway (BRK.B) is the biggest investor in Kraft Heinz. It owns nearly 326 million shares. Following the huge drop Friday, that stake was worth about $4.3 billion less than what it was on Thursday.
Buffett's partner on the Kraft Heinz deal, giant private equity firm 3G Capital, is getting hit hard too. The value of its investment plunged by about $3.5 billion.
Other big losers? Average Americans that likely own at least a small slice of Kraft Heinz in mutual funds or ETFs. Vanguard, State Street, BlackRock, Invesco and Fidelity are all among the 10 largest shareholders of Kraft Heinz.
- Wrote down the value of its Kraft and Oscar Mayer brands by $15 billion
- Posted a $12.6 billion loss
- Cut its dividend by 36%
- And announced its accounting practices are under investigation by the SEC
Sales were up about 1% in the fourth quarter.
But higher-than-expected manufacturing and logistics costs plagued the company, and it overestimated that savings from its 2015 merger would continue to help lower costs.
Kraft said cutting the dividend will help the company reduce its debt faster, support its investments and help the company divest businesses that aren't supporting the bottom line.
By doing this we can improve our growth and returns over time," said CEO Bernardo Hees.
"We still believe ... strongly that our model is working and has a lot of potential for the future."
The Dow rose 90 points as American and Chinese trade negotiators continue talks in Washington. Investors have grown increasingly optimistic that the two sides will strike a deal to avoid another costly round of tariffs.
The S&P 500 and the Nasdaq each rose 0.3%.
From CEO Kenneth McBride on the Stamps.com (STMP) earnings call:
Amazon is changing the shipping business
Our customers are demanding and need 2-day delivery guaranteed. They need to have carriers other than the USPS.
How the Postal Service deal fell apart
USPS has not agreed to accept these terms or any other terms of our partnership proposal. So at this point, we've decided to discontinue our shipping partnership with the USPS so that we can fully embrace partnerships with other carriers who we think will be well positioned to win in the shipping business in the next 5 years.
Why make the change now?
What's next for Stamps.com?
The short-term financial impact we will experience as we forgo our shipping revenue share with the USPS will represent some short-term pain for us over the next few years.
Berkshire Hathaway (BRKA) is expected to report earnings on Friday. If history is a guide, CEO Warren Buffett will also release his annual shareholder letter on Saturday.
Buffett's letter is closely read for its investment advice.
This year, the memo will be mined for insight on slowing economic growth in the United States and around the world, and what it means for companies and markets.
US stock futures are pointing higher this morning.
Investors offloaded stocks yesterday after getting several pieces of worrying news about the global economy.
US durable goods orders grew less then expected in December, and existing home sales declined in January. Surveys showed further manufacturing weakness across the developed world.
"The US data have clearly turned a corner recently," said Simon MacAdam, global economist at Capital Economics. "With the economy likely to lose a lot more pace this year, the Fed is unlikely to hike rates again this cycle."