Kraft Heinz (KHC)

Packaged foods company Kraft Heinz (NASDAQ:KHC) met Wall Street’s revenue expectations in Q4 CY2025, but sales fell by 3.4% year on year to $6.35 billion. Its non-GAAP profit of $0.67 per share was 9.1% above analysts’ consensus estimates.

Company Overview

The result of a 2015 mega-merger between Kraft and Heinz, Kraft Heinz (NASDAQ:KHC) is a packaged foods giant whose products span coffee to cheese to packaged meat.

As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.

Competitors in packaged food with diverse brand portfolios include Mondelez (NASDAQ:MDLZ), Campbell Soup (NYSE:CPB), General Mills (NYSE:GIS), and Nestle (SWX:NESN).

A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $24.94 billion in revenue over the past 12 months, Kraft Heinz is one of the most widely recognized consumer staples companies. Its influence over consumers gives it negotiating leverage with distributors, enabling it to pick and choose where it sells its products (a luxury many don’t have). However, its scale is a double-edged sword because there are only so many big store chains to sell into, making it harder to find incremental growth. For Kraft Heinz to boost its sales, it likely needs to adjust its prices, launch new offerings, or lean into foreign markets.

As you can see below, Kraft Heinz struggled to generate demand over the last three years. Its sales dropped by 2% annually as consumers bought less of its products.

This quarter, Kraft Heinz reported a rather uninspiring 3.4% year-on-year revenue decline to $6.35 billion of revenue, in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months. While this projection indicates its newer products will spur better top-line performance, it is still below average for the sector.

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful staples business as there’s a ceiling to what consumers will pay for everyday goods; they can always trade down to non-branded products if the branded versions are too expensive.

To analyze whether Kraft Heinz generated its growth (or lack thereof) from changes in price or volume, we can compare its volume growth to its organic revenue growth, which excludes non-fundamental impacts on company financials like mergers and currency fluctuations.

Over the last two years, Kraft Heinz’s average quarterly volumes have shrunk by 3.8%. This isn’t ideal for a consumer staples company, where demand is typically stable. In the context of its 2.7% average organic sales declines, we can see that most of the company’s losses have come from fewer customers purchasing its products.

In Kraft Heinz’s Q4 2025, sales volumes dropped 4.7% year on year. This result represents a further deceleration from its historical levels, showing the business is struggling to move its products.

Kraft Heinz’s unit economics are higher than the typical consumer staples company, giving it the flexibility to invest in areas such as marketing and talent to reach more consumers. As you can see below, it averaged a decent 34% gross margin over the last two years. That means for every $100 in revenue, $65.96 went towards paying for raw materials, production of goods, transportation, and distribution.

Kraft Heinz produced a 32.6% gross profit margin in Q4, down 1.6 percentage points year on year. Kraft Heinz’s full-year margin has also been trending down over the past 12 months, decreasing by 1.4 percentage points. If this move continues, it could suggest a more competitive environment with some pressure to lower prices and higher input costs (such as raw materials and manufacturing expenses).

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Although Kraft Heinz was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 5.9% over the last two years. Unprofitable public companies are rare in the defensive consumer staples industry, so this performance certainly caught our eye.

Looking at the trend in its profitability, Kraft Heinz’s operating margin decreased by 25.2 percentage points over the last year. Kraft Heinz’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

In Q4, Kraft Heinz generated an operating margin profit margin of 17.1%, up 17.7 percentage points year on year. The increase was solid, and because its revenue and gross margin actually decreased, we can assume it was more efficient because it trimmed its operating expenses like marketing, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Kraft Heinz, its EPS and revenue declined by 2.3% and 2% annually over the last three years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Kraft Heinz’s low margin of safety could leave its stock price susceptible to large downswings.

In Q4, Kraft Heinz reported adjusted EPS of $0.67, down from $0.84 in the same quarter last year. Despite falling year on year, this print beat analysts’ estimates by 9.1%. Over the next 12 months, Wall Street expects Kraft Heinz’s full-year EPS of $2.59 to shrink by 3.9%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Kraft Heinz has shown terrific cash profitability, enabling it to reinvest, return capital to investors, and stay ahead of the competition while maintaining an ample cushion. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 13.4% over the last two years. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Taking a step back, we can see that Kraft Heinz’s margin expanded by 2.5 percentage points over the last year. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Kraft Heinz’s free cash flow clocked in at $1.17 billion in Q4, equivalent to a 18.4% margin. This result was good as its margin was 1.1 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Kraft Heinz historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 1.1%, lower than the typical cost of capital (how much it costs to raise money) for consumer staples companies.

Kraft Heinz reported $3.68 billion of cash and $21.22 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $5.69 billion of EBITDA over the last 12 months, we view Kraft Heinz’s 3.1× net-debt-to-EBITDA ratio as safe. We also see its $386 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Kraft Heinz beat analysts’ EPS expectations this quarter. On the other hand, its full-year EPS guidance missed and its organic revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 6.4% to $23.32 immediately after reporting.

Updated: February 11, 2026 at 7:22 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Kraft Heinz.

We see the value of companies helping consumers, but in the case of Kraft Heinz, we’re out. To kick things off, its revenue has declined over the last three years. And while its unparalleled brand awareness makes it a household name consumers consistently turn to, the downside is its declining operating margin shows the business has become less efficient. On top of that, its operating margins reveal poor profitability compared to other consumer staples companies.

Kraft Heinz’s P/E ratio based on the next 12 months is 10x. This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are more exciting stocks to buy at the moment.

Wall Street analysts have a consensus one-year price target of $26.50 on the company (compared to the current share price of $23.32).