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Investing.com - Morgan Stanley has upgraded Kraft Heinz Company (NASDAQ:KHC) from Underweight to Equalweight and raised its price target to $29.00 from $28.00. The stock currently trades at $26.02, near its 52-week low of $25.44, while offering investors a substantial 6.15% dividend yield.
The upgrade comes as Morgan Stanley believes its previous bearish thesis has largely played out, with Kraft Heinz shares down 15% year-to-date compared to a 7% decline in the broader U.S. food sector. The firm notes that consensus forecasts have been revised 5% lower over the past six months, now reaching more reasonable levels. According to InvestingPro analysis, the stock appears undervalued, with a strong free cash flow yield of 11%.
Morgan Stanley indicates that the second quarter likely marks the bottom for organic sales growth, with recent scanner data showing early signs of stabilization in the company’s performance metrics.
Despite the upgrade, the investment bank still anticipates pressure on fiscal 2026 earnings per share due to higher input costs, particularly in the first half, and potentially continued reinvestment needs given ongoing structural headwinds in the North American retail business.
The firm also points to Kraft Heinz’s announced separation as a factor that should provide support for shares and limit downside risk, as investors evaluate the growth potential of the new Global Taste Elevation Co., which will focus on emerging markets and foodservice segments representing approximately 40% of sales post-separation. The company maintains a "Fair" overall financial health score according to InvestingPro analysis.
In other recent news, Kraft Heinz reported its second-quarter earnings for 2025, which exceeded Wall Street’s expectations. The company achieved an earnings per share of $0.69, surpassing the anticipated $0.64, and recorded revenue of $6.35 billion, above the forecasted $6.25 billion. In a significant strategic move, Kraft Heinz announced plans to split into two separate companies, prompting Moody’s Ratings to place its ratings under review for a potential downgrade. This review affects Kraft Heinz’s Baa2 senior unsecured ratings and Prime-2 commercial paper ratings, as well as the ratings of several related entities.
Warren Buffett expressed disappointment over the planned split, noting that it reverses much of the merger he orchestrated a decade ago. Meanwhile, Mizuho has maintained its Neutral rating on Kraft Heinz, citing improvements in execution despite ongoing portfolio challenges. The firm highlighted that renovation and innovation are priorities, with new products and marketing efforts expected to play a significant role in the latter half of the year. These developments reflect a period of transformation and strategic reevaluation for Kraft Heinz.
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