A month has gone by since the last earnings report for Kraft Heinz (KHC). Shares have lost about 5% in that time frame, underperforming the S&P 500.
But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Kraft Heinz due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the latest earnings report in order to get a better handle on the important drivers.
Kraft Heinz Q1 Earnings Beat Estimates Despite Organic Sales Dip
The Kraft Heinz Company posted first-quarter 2026 results, wherein it posted adjusted earnings of 58 cents per share, beating the Zacks Consensus Estimate of 50 cents. Quarterly adjusted earnings fell 6.5% year over year, mainly due to lower adjusted operating income, partially offset by reduced tax expenses on adjusted earnings.
The company generated net sales of $6,047 million, up 0.8% year over year. The metric beat the Zacks Consensus Estimate of $5,908 million. The increase included a favorable 1.9 percentage-point impact from foreign currency, partially offset by a 0.7 percentage-point drag from divestitures. However, organic net sales declined 0.4% compared with the prior-year period. Our model expected a 3.2% dip in organic sales.
Pricing contributed positively, rising 0.8 percentage points across all segments, mainly driven by price increases in select categories to offset higher input costs. In contrast, volume/mix fell 1.2 percentage points, with declines across all segments. This weakness was largely due to reduced demand in coffee, cold cuts and Indonesia, which outweighed gains from seasonal factors such as the shift in Easter timing.
The adjusted gross profit of $2,064 million increased from the $2,061 million reported in the year-ago quarter. However, adjusted gross margin contracted 30 bps to 34.1%. We expected an adjusted gross margin decline of 120 bps to 33.1%. Adjusted operating income declined 11.8% year over year to $1,058 million. The drop was primarily caused by higher advertising expenses, inflationary pressures in manufacturing and logistics that exceeded efficiency gains, and unfavorable volume/mix. These headwinds more than offset the benefits from higher pricing, one-time procurement cost recoveries and favorable foreign currency effects.
Decoding KHC’s Segment-Wise Results
North America: Net sales of $4,458 million declined 0.7% year over year. Organic sales fell 1.1%. We expected a 4% decline in segment organic sales. During the quarter, pricing increased 0.4 percentage points and the volume/mix fell 1.5 percentage points.
International Developed Markets: Net sales of $843 million were up 3.2% year over year. Organic sales declined 0.1%, with pricing up 0.2 percentage points and volume/mix dipping 0.3 percentage points. We expected a 3.6% decline in segment organic sales.
Emerging Markets: Net sales of $746 million were up 7.6% year over year. Organic sales grew 3.8%. We expected 2.2% growth in segment organic sales. Pricing was up 4.4 percentage points, but volume/mix declined 0.6 percentage points.
Kraft Heinz: Other Financial Aspects & Guidance
Kraft Heinz ended the quarter with cash and cash equivalents of $3,308 million, long-term debt of $19,223 million and total shareholders’ equity (excluding noncontrolling interest) of $41,923 million. Net cash provided by operating activities was $1,006 million for the three months ended March 28, 2026, and free cash flow was $766 million. The company returned $474 million to its shareholders through cash dividends in the first quarter. Kraft Heinz did not repurchase any shares under its existing buyback program. As of March 28, 2026, KHC had approximately $1.5 billion remaining under its authorized repurchase capacity.
For 2026, Kraft Heinz still expects organic net sales to decline 1.5% to 3.5% year over year, indicating an estimated 100 bps impact from incremental SNAP-related headwinds.
Constant currency adjusted operating income is projected to decline 14% to 18%. Adjusted gross profit margin is expected to decrease 25-75 bps compared with the prior year. The company anticipates adjusted EPS to be between $1.98 and $2.10.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a flat trend in estimates review.
VGM Scores
At this time, Kraft Heinz has a average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, the stock was allocated a score of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Kraft Heinz has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Kraft Heinz is part of the Zacks Food - Miscellaneous industry. Over the past month, Sysco (SYY), a stock from the same industry, has gained 2%. The company reported its results for the quarter ended March 2026 more than a month ago.
Sysco reported revenues of $20.52 billion in the last reported quarter, representing a year-over-year change of +4.7%. EPS of $0.94 for the same period compares with $0.96 a year ago.
Sysco is expected to post earnings of $1.51 per share for the current quarter, representing a year-over-year change of +2%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Sysco. Also, the stock has a VGM Score of B.
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This article originally published on Zacks Investment Research (zacks.com).