MW Kraft Heinz is trying to keep its prices competitive. Some analysts don't think it will be enough.

By Bill Peters

'How can we have confidence that the operations are better when all of these problems are happening at once?' analyst says

As shoppers continue to struggle with higher grocery prices, Kraft Heinz Co. - known for its Mac and Cheese, Heinz Ketchup and Capri Sun - wants to give them a break from inflation this year.

But in the wake of the packaged-food giant's quarterly results on Wednesday and a disappointing profit forecast, analysts say it still has lots of work to do to win back customers, amid competition and what some said were execution missteps in some of its most well-known brands.

"While some may consider the guide conservative, we believe KHC will need to make bigger investments in price and quality to bring consumers back to their brands," TD Cowen analysts, led by Robert Moskow, wrote in a research note on Wednesday.

While shares fell on Wednesday, they were up around 1% on Thursday. Still, the stock is down 17.4% over the past 12 months.

TD Cowen analysts said Mac and Cheese hadn't kept up with higher-end competition. Capri Sun was still an area of improvement following a recipe change intended to cut sugar, while Consumer Reports last year raised concerns about health risks in Lunchables.

BofA analysts, meanwhile, said that Kraft Heinz's $(KHC)$ mayonnaise faced competition from Hellman's and Mike's. The Wall Street Journal reported last year that Kraft Heinz was exploring a sale of Oscar Mayer, as the company tries to become more appealing to health-conscious consumers.

He added later: "How can we have confidence that the operations are better when all of these problems are happening at once?"

In its fourth-quarter earnings release on Wednesday, Kraft Heinz said 2024 was a "challenging" year. Sales fell during the fourth quarter. During its earnings call, executives said they expected an "elongated recovery" for its biggest brands in the U.S., an area where they're investing the most money to keep prices lower.

The BofA analysts said to expect Kraft Heinz's prices to be "flat to slightly up for the year." While they said emerging markets were a potential bright spot, they downgraded shares of the company to underperform, or the equivalent of a sell rating.

"Downgrading KHC shares on the lows is not heroic, but we struggle to see a path forward to meaningful organic sales improvement over the next 12 months," they said. "Unlike food peers who have reset [earnings per share] expectations with their initial FY25 outlooks this earnings season [such as Hershey and Mondelez], KHC continues to have a revenue problem."

JPMorgan analysts said they could understand why some investors might want to buy the dip in Kraft Heinz's shares, given the prospect for the company to sell more actual food if it can stay competitive on prices and marketing efforts resonate with shoppers.

"But we also understand why certain observers hesitate to call the bottom considering how shaky fundamentals have been (and the perception that a turnaround will be challenging given ongoing competitive threats)," they said. "From our perspective, we remain comfortable on the sideline."

-Bill Peters

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February 13, 2025 15:13 ET (20:13 GMT)

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