The Kraft Heinz Company KHC is facing significant challenges, with its shares plunging 19.5% over the past three months. This decline is steeper than the 13.8% fall of the industry and the 11% decrease of the broader Consumer Staples sector. In addition, Kraft Heinz has underperformed the S&P 500, which saw a modest increase of 0.7% during the same period.

Several factors are contributing to these struggles, including ongoing challenges in the consumer environment and cost woes. These elements have dampened consumer sentiment, ultimately affecting Kraft Heinz’s performance. Let’s take a closer look at the factors at play and discuss strategies for investors considering the stock moving forward.

Tough Macroeconomic Conditions Weigh on Kraft Heinz

The ongoing struggles in the consumer environment and persistent inflation concerns have dampened consumer sentiment and increased the focus on value seeking. These factors have contributed to a slower-than-expected recovery across the industry, putting additional pressure on Kraft Heinz. The company faced a challenging third-quarter 2024, wherein the top line decreased year over year and missed the Zacks Consensus Estimate. Net sales of $6,383 million declined 2.8% year over year, while organic net sales fell 2.2%.

In its last earnings call, management highlighted that it expects organic net sales at the lower end of the guidance range of down 2% to flat year over year for 2024. The adjusted earnings per share (EPS) is envisioned in the lower end of the projected range of 1-3% growth to $3.01-$3.07. The company also noted that inflation is expected to remain around 4% for the full year.

KHC's Price Performance

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Kraft Heinz’s Declining Volume Raises Concerns

Kraft Heinz has been experiencing weak volume performance over the past few quarters, with the trend continuing into the third quarter. During this period, the company’s volume/mix dropped 3.4 percentage points, with declines in North America and International Developed Markets. The negative impact on the volume/mix was due to changing consumer behavior stemming from economic uncertainty. In North America, volume/mix fell 4.4 percentage points, while in International Developed Markets, the metric dipped 0.8 percentage points. This persistent trend is expected to affect the company’s overall performance.

What Should KHC’s Investors Do?

Kraft Heinz investors should stay updated on its ongoing challenges, such as weak consumer demand, cost pressures and declining volumes. Although the company is focusing on strategic transformation and innovation, a full recovery may take time. Investors should closely monitor future earnings reports, with particular attention to volume/mix trends and inflationary impacts. In the meantime, it may be wise for investors to explore alternative opportunities until there are clear signs of improvement in its performance. Currently, KHC holds a Zacks Rank #4 (Sell).

Some Solid Staple Bets

We have highlighted three better-ranked stocks from the Consumer Staples sector, namely United Natural Foods, Inc. UNFI, Freshpet FRPT and Tyson Foods, Inc. TSN.

United Natural currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average.

You can see the complete list of today’s Zacks #1 Rank stocks here.

The consensus estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.

Freshpet, a pet food company, presently sports a Zacks Rank #1. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.

The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.2% and 228.6%, respectively, from the year-ago period’s reported figure.

Tyson Foods operates as a food company worldwide. It operates through four segments: Beef, Pork, Chicken and Prepared Foods. It currently carries a Zacks Rank #2 (Buy). TSN delivered a trailing four-quarter average earnings surprise of 57%.

The consensus estimate for Tyson Foods’ current fiscal-year sales and earnings indicates growth of 2% and 13.6%, respectively, from the prior-year reported levels.

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Tyson Foods, Inc. (TSN) : Free Stock Analysis Report

Freshpet, Inc. (FRPT) : Free Stock Analysis Report

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Kraft Heinz Company (KHC) : Free Stock Analysis Report

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