Kraft Heinz Company (KHC) Earnings & Analysis

Latest quarter

Kraft Heinz reported third-quarter revenue of $6.1 billion, down from $6.2 billion a year earlier, but above the consensus. Its adjusted earnings per share of $0.53 also exceeded estimates. Diluted earnings per share fell to $0.46 from $0.52.

The company attributed the decline in organic sales primarily to unfavorable volume and product mix. North American sales fell −3.40%, with the filing citing declines in meats, sauces and refreshment beverages; it said retailers had moved purchases into the previous quarter and reduced inventories in the third. Emerging Markets sales rose, helped by higher prices and favorable volume and mix.

The filing said adjusted operating income fell to $939.0 million as manufacturing and logistics inflation exceeded efficiency savings, alongside higher compensation costs and unfavorable volume and mix. Gross margin rose to 32.5% from 31.9%, while operating margin fell to 14.3% from 16.4%. Kraft Heinz reported free cash flow of $702.0 million, compared with $986.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Steve Cahillane said the quarter came in ahead of the company’s original plan, and that Kraft Heinz had leveled out in holding market share. CFO Andre Maciel said U.S. retail consumption was a little better than expected, although pressure from retailer inventories was greater than anticipated.

Maciel said 28.0% of revenue came from products gaining share during the quarter. Cahillane said Kraft Heinz was improving the rate at which products moved off shelves despite having fewer shelf placements after distribution losses. He expects investments and the innovation pipeline to help the company increase distribution following retailer resets next year.

Discussing Philadelphia cream cheese, Cahillane said the brand gained share but lost consumption as the category came under pressure. He said some price investments had reduced category prices without producing the intended result, and the company was adjusting. He also said the category needed more innovation as consumers switched toward cottage cheese and other protein-focused products.

On investment, Maciel said Kraft Heinz had spent most of its annual trade and marketing plan by the end of the quarter and concentrated more effort in the fourth quarter, when its market share historically peaks around Thanksgiving and Christmas. He said the company was deploying its $700.0 million investment across several areas and had hired 80.0% of the people it planned to add.

Asked about inflation, Cahillane said productivity remained the first response, but he expected pricing to be necessary next year. Maciel said the inflation forecast had risen above the prior range, citing packaging, commodities and an expected reversal of some dairy cost benefits. He said some pricing across regions would help protect gross margins.

Cahillane also discussed the agreement to divest the North American coffee business to One Rock, saying Kraft Heinz would retain a non-controlling stake and concentrate capital and management attention elsewhere. He said the company would not provide a market-share forecast.

Guidance

Kraft Heinz narrowed its FY2026 organic net sales outlook to a change of −1.25% to −0.50%, from its previous range of −2.00% to −0.50%. The company raised its adjusted EPS outlook to $2.07–$2.13 and lowered its expected adjusted EPS tax rate to approximately 23.5%.

For 2027, CFO Andre Maciel said the company now expects inflation slightly above its previous forecast, while CEO Steve Cahillane said pricing would likely be necessary.