JPMorgan downgrades Kraft Heinz after weak outlook, halting company split

Investing.com -- JPMorgan downgraded Kraft Heinz to Underweight from Neutral, citing a weak 2026 earnings outlook, ongoing volume declines in North America and the risk that higher spending may take time to produce results.

Shares of the company were down 1.5% at $24.55 in premarket trading. The brokerage cut its price target to $22 from $24.

Kraft Heinz’s also halt plans to split the company, with new Chief Executive Steve Cahillane citing tougher conditions in the food industry.

The company had previously planned to separate its grocery business from its sauces and spreads unit. It also projected muted earnings for 2026.

JPMorgan said the lowered earnings outlook could reduce near-term downside risk but warned that longer-term challenges remain, particularly around volumes.

North America volumes have declined more than 3% year over year for 19 straight quarters, with weakness across most major retail categories and continued market share losses, especially in packaged lunch meat.

The firm said planned investments in marketing and innovation could help over time, but results may not be immediate.

Kraft Heinz plans about $600 million in incremental spending in 2026, including higher marketing, added headcount, research and development, packaging changes and price investments. These efforts are expected to pressure profit, alongside about 4% cost inflation and higher incentive compensation.

Kraft Heinz reported fourth-quarter earnings per share of $0.67, beating estimates due to lower overhead costs and a favorable tax rate. Organic sales fell 4.2%, missing expectations, driven by a 4.7% drop in volume and mix.

For 2026, the company expects organic sales to decline 3.5% to 1.5% and earnings of $1.98 to $2.10 per share, both below market expectations.

JPMorgan said the company’s dividend will absorb nearly 80% of free cash flow this year, which could limit financial flexibility if efforts to drive growth take longer than expected.

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