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Kraft Heinz Stock Downgraded Amid Persistent Woes
12 Feb
Summary
- JPMorgan downgraded Kraft Heinz stock to underweight, citing ongoing challenges.
- The company paused plans to split, despite recent quarterly earnings beat.
- Kraft Heinz will invest $600 million to revive its U.S. business operations.
JPMorgan has downgraded Kraft Heinz to an underweight rating, citing persistent challenges expected to impact the company's shares. Analyst Thomas Palmer lowered the price target to $22 from $24, indicating a potential 12% downside. The company recently announced it is pausing its previously announced plans to split.
CEO Steve Cahillane acknowledged that many of Kraft Heinz's issues are resolvable internally. This announcement was made alongside the release of the company's quarterly earnings. Despite beating fourth-quarter earnings expectations, the company's outlook for 2026 earnings per share and organic sales growth falls short of consensus estimates.
Kraft Heinz plans to invest $600 million to revitalize its U.S. business, allocating funds to marketing, sales, and research and development. However, the analyst noted that U.S. volume challenges have persisted for 19 consecutive quarters, declining 3% year-over-year due to market share losses and weaker category performance.
Further concerns include the time it may take for marketing investments to yield results and potential selling pressure from Berkshire Hathaway. A stretched dividend payout ratio also limits financial flexibility, compounded by reduced near-term options after halting the breakup plans.
