Overview
JPMorgan moved Kraft Heinz to an Underweight rating from Neutral and lowered its price target to $22 from $24 following the company's subdued outlook for 2026 and other strategic developments. In premarket trading the stock was down 1.5% at $24.55.
Pause on corporate split and management view
Kraft Heinz has halted plans to split the company. New Chief Executive Steve Cahillane pointed to tougher conditions in the food industry as the rationale for shelving the plan. The separation would have divided the grocery business from the sauces and spreads unit, but the company will not proceed with that action at this time.
Guidance and financial expectations
The company set expectations for muted performance in 2026. Kraft Heinz reported fourth-quarter earnings per share of $0.67, which beat estimates due largely to lower overhead costs and a favorable tax rate. However, organic sales declined 4.2% in the quarter, missing expectations, a result driven by a 4.7% drop in volume and mix.
For 2026 the firm expects organic sales to fall in a range of 3.5% to 1.5% and projects earnings per share between $1.98 and $2.10. JPMorgan described those forecasts as below market expectations.
Volume trends and market share
JPMorgan highlighted persistent volume weakness in North America, noting that volumes in the region have declined by more than 3% year over year for 19 consecutive quarters. The brokerage flagged weakness across most major retail categories and ongoing market share losses, with packaged lunch meat singled out as an area of particular weakness.
Planned investments and margin pressure
Kraft Heinz said it plans about $600 million in incremental spending in 2026. The company outlined higher marketing expenditures, added headcount, increased research and development, packaging changes, and price investments as components of that spending. JPMorgan warned these investments could take time to produce results and will likely pressure profits in the near term, alongside approximately 4% cost inflation and higher incentive compensation.
Cash flow and dividend considerations
The brokerage also noted that the company's dividend is expected to absorb nearly 80% of free cash flow this year. JPMorgan suggested that heavy dividend consumption of free cash flow could limit financial flexibility, particularly if initiatives to restore growth require a longer payback period.
Implications
JPMorgan said the reduced earnings outlook may lessen immediate downside risk to the stock, but that longer-term challenges remain, principally around volumes and the timeliness of spending benefits.