MW Kraft Heinz's stock looks like it has bottomed out, one analyst says
By Steve Gelsi
The planned separation of Kraft Heinz into two publicly traded companies will limit the downside for the business, Morgan Stanley says
Kraft's stock price is now more reasonable, a Morgan Stanley analyst said.
A big drop in Kraft Heinz Inc.'s stock price has left the food giant at a "reasonable" valuation as its planned split into two separate companies approaches, a Morgan Stanley analyst said Wednesday.
On the minus side, however, earnings-per-share growth will likely come under pressure next year from higher input costs, even as Kraft Heinz will need to invest in its brands due to "weak absolute trends and "structural headwinds" in its North American retail business, Morgan Stanley's Megan Alexander said in a research note.
She upgraded the stock $(KHC)$ to equal weight because the factors behind her earlier bearish rating of underweight have "mostly played out," Alexander said.
Basically, the stock appears to have bottomed out.
"While [fiscal 2026 earnings per share] growth will likely remain pressured, valuation looks reasonable and we believe the planned separation will limit downside," Alexander said. "We think the worst is behind us."
Kraft Heinz's stock rose 2.3% to $26.63 a share on Wednesday.
Alexander's change in outlook comes a day after the stock fell 7% in its worst one-day loss in since May 26, 2022, after Kraft Heinz confirmed plans to create two publicly traded companies in a deal expected to be finalized by the end of 2026.
While Kraft Heinz shareholder Warren Buffett of Berkshire Hathaway Inc. $(BRK.B)$ $(BRK.A)$ said he doesn't like the company's breakup plan, Morgan Stanley's Alexander believes that the deal has merits.
The creation of Global Taste Elevation Co. - the working name of a carve-out from Kraft Heinz with annual sales of $15.4 billion - offers greater growth potential in emerging markets and in the food-service business, she said. The business is expected to see more than 3% organic sales growth per year over the long term, she said.
It will also contain three billion-dollar brands: Kraft Mac & Cheese, Philadelphia cream cheese and Heinz ketchup.
The other new company, with the working name of North American Grocery Co., will house three other billion-dollar brands: Lunchables, Oscar Mayer and Kraft Singles, with total sales for the unit at about $10.4 billion. It will compete with other supermarket packaged-food giants such as General Mills Inc. $(GIS)$, J.M. Smucker Co. $(SJM)$, Conagra Brands Inc. $(CAG)$ and Campbell's Co. $(CPB)$.
While other companies have sold off pieces of their business - such as Conagra's sale of Chef Boyardee for $600 million to private-equity firm Brynwood Partners - the breakup move by Kraft Foods more closely resembles the decision by Kellogg to split itself into Kellanova $(K)$ and WK Kellogg Co. (KLG), she said. Both those companies are now being acquired.
"{Kraft Heinz's] decision to split into two distinct businesses represents a more comprehensive, streamlined approach ... and may signal that additional companies could consider pursuing broader structural change," Alexander said.
Including Wednesday's moves, Kraft Heinz's stock is up 3.7% for the year, while the S&P 500 SPX has risen 9.4%.
-Steve Gelsi
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September 03, 2025 14:36 ET (18:36 GMT)
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