Kraft Heinz stock rating reiterated at Underweight by Morgan Stanley

Investing.com - Morgan Stanley (NYSE:MS) has reiterated its Underweight rating and $28.00 price target on Kraft Heinz Company (NASDAQ:KHC). According to InvestingPro data, the stock trades at a P/E of 12.23 and offers a 5.9% dividend yield, with analysis suggesting the stock is currently undervalued.

The firm expressed bearish sentiment on Kraft Heinz’s ability to improve market share performance without making significant investments that would pressure profitability.

Morgan Stanley noted that it views little risk heading into Kraft Heinz’s second-quarter earnings, with current Street estimates appearing reasonable based on recent scanner trends.

The firm acknowledged that while second-half organic sales growth forecasts might be too optimistic, Kraft Heinz may have flexibility given it included an "onerous tariff assumption" in its full-year earnings outlook.

Despite the Underweight rating, Morgan Stanley suggested the stock might find support until there is more clarity on any potential proposed transaction, noting that investor sentiment has been "weak/apathetic" toward the company.

In other recent news, Kraft Heinz announced an agreement to sell its Italian infant and specialty food business to NewPrinces S.p.A., with the transaction expected to close by the end of 2025, pending regulatory approval. This move aligns with Kraft Heinz’s strategy to focus on its core areas, such as HEINZ Tomato Ketchup and other Taste Elevation products. Additionally, Kraft Heinz has amended its $4 billion revolving credit facility, extending the maturity date by one year to 2030, in agreement with JPMorgan Chase (NYSE:JPM) Bank and other lenders. This amendment includes revisions to financial covenants under the credit agreement.

In terms of analyst activity, Jefferies has lowered its price target on Kraft Heinz to $26.00 from $27.00 while maintaining a Hold rating, citing increased promotional activity impacting retail price realization. Stifel also maintains a Hold rating with a $30.00 price target amid reports of a potential spin-off of a significant portion of Kraft Heinz’s grocery business. The company is reportedly considering spinning off slower growth categories into a separate entity valued at up to $20 billion. In executive news, Marcos Eloi Lima will step down as Executive Vice President and Chief Procurement and Sustainability Officer, with Janelle Aydin set to assume the role.

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