JPMorgan downgrades Kraft Heinz, says it faces limited near-term upside after breakup pause

JPMorgan says that persistent challenges will weigh down shares of Kraft Heinz as the company backs away from plans to split The bank downgraded the food company to an underweight rating from neutral. Analyst Thomas Palmer also lowered his price target to $22 from $24. Shares of Kraft Heinz have slipped 13% over the past 12 months but are up 3% on the year. Palmer’s revised price forecast calls for a downside of 12%. KHC 1Y mountain KHC 1Y chart On Wednesday, the company announced that it was pausing work on its previous announcement to split the company. CEO Steve Cahillane, who took the helm last month, said in a statement that many of Kraft Heinz’s issues are “fixable and within our control.” This announcement on Wednesday was made alongside Kraft Heinz’s quarterly earnings release. The company also said it plans to invest $600 million in an attempt to turn around its U.S. business, and that this money will go into marketing, sales, and research and development. Palmer said that while the company reported a fourth-quarter earnings beat, its earnings per share and organic sales growth outlooks for 2026 look below consensus estimates. The company’s revenue also fell short of Wall Street’s consensus estimate. “We appreciate that the substantially lowered earnings outlook for 2026 could reduce earnings risk, especially over the next couple of quarters. But we see ongoing challenges that could limit KHC’s expected volume inflection as 2026 progresses,” Palmer wrote. For example, these headwinds include Kraft Heinz’s U.S. volume challenges that remain broad-based and have declined 3% year over year for 19 consecutive quarters. The analyst attributed these headwinds to both market share losses and weaker category performance. Another obstacle is the fact that Kraft Heinz’s investments seem to be more focused towards improving marketing, which often takes some time to gain traction. “Higher marketing may be the right choice for the longer term — but the returns could take time to take hold,” Palmer said. The analyst also cited other potential overhangs, such as ongoing selling pressure from Berkshire Hathaway, a stretched dividend payout ratio that limits financial flexibility and reduced near-term optionality after halting its breakup.