TLDR
- Kraft Heinz announced plans to split into two companies: Global Taste Elevation Co. (sauces, spreads, seasonings) and North American Grocery Co. (grocery staples)
- Stock fell nearly 7% on September 2 following the split announcement as investors reacted negatively
- Morgan Stanley upgraded KHC from Sell to Hold with $29 price target, citing that bearish thesis has “largely played out”
- Multiple analysts maintain Hold ratings with concerns about growth potential and profitability for both new companies
- Stock trades near 52-week low at $26.02, down 15% year-to-date compared to 7% decline in broader food sector
Kraft Heinz stock has become the center of Wall Street attention after the food giant announced its plan to break apart into two separate companies. The decision aims to create more focused businesses with less complexity.
The company will split into Global Taste Elevation Co. and North American Grocery Co. Global Taste Elevation will handle sauces, spreads, and seasonings. North American Grocery will focus on grocery staples sold in North America.
Stock dropped nearly 7% on September 2 when the news broke. Investors initially showed concern about the split plan. Shares recovered some ground the following morning as markets reassessed the move.
Morgan Stanley analyst Megan Alexander upgraded the stock from Sell to Hold. She raised her price target to $29 from $28, suggesting 11.5% upside potential. Alexander said her previous bearish view has “largely played out” and current earnings estimates look “more reasonable.”
The analyst expects earnings per share growth to remain under pressure in fiscal 2026. However, she believes the planned separation should help limit further downside for the stock.
Mizuho Securities analyst John Baumgartner kept his Hold rating with a $29 price target. He said the corporate split “likely strengthens the floor under the stock.” Still, he pointed to ongoing growth concerns that could limit near-term gains.
Analyst Concerns Mount Over Growth Prospects
Jefferies analyst Scott Marks raised questions about both new companies’ growth and margin potential. He maintained his Hold rating with a $28 price target, offering 7.6% upside from current levels.
Marks noted that the North American Grocery segment continues to see declining profitability. The brands face long-term weaker consumption trends that remain a challenge.
The analyst said the split may simplify the portfolio and enable more focused strategies. But uncertainties around sustaining profitability continue to weigh on the outlook.
Recent Performance and Market Position
The stock currently trades at $26.02, close to its 52-week low of $25.44. Year-to-date performance shows an 11.6% decline for KHC shares.
The broader U.S. food sector has fallen 7% during the same period. This puts Kraft Heinz’s decline at more than double the sector average.
Consensus forecasts have been revised 5% lower over the past six months. This revision brings estimates to more achievable levels according to Morgan Stanley.
The company offers investors a dividend yield of 6.15%. This provides income while shareholders wait for potential turnaround results.
Second quarter earnings exceeded Wall Street expectations. The company reported earnings per share of $0.69, beating the anticipated $0.64. Revenue came in at $6.35 billion, above the forecasted $6.25 billion.
Warren Buffett expressed disappointment over the planned split. The move reverses much of the merger he helped orchestrate nearly a decade ago when Kraft Foods and Heinz combined.
Moody’s Ratings has placed the company’s ratings under review for potential downgrade. The review affects Kraft Heinz’s Baa2 senior unsecured ratings and Prime-2 commercial paper ratings.
The Global Taste Elevation Co. will focus on emerging markets and foodservice segments. These areas represent approximately 40% of sales after the separation is complete.
Morgan Stanley indicates that the second quarter likely marks the bottom for organic sales growth. Recent scanner data shows early signs of stabilization in company performance metrics.
