Kraft Heinz Co (KHC): what the price requires
The current priced-in claim for Kraft Heinz Co (KHC) is temporarily suppressed because the live engine record is unavailable. The dated report remains a snapshot, not a current market read.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/KHC
Headline
| Field | Value |
|---|---|
| Ticker | KHC |
| Company | Kraft Heinz Co |
| Current price | $25.11/sh |
| Composition | Taste Elevation 45% / Easy Ready Meals 16% / Substantial Snacking 6% / Desserts 5% / Hydration 8% / Cheese 7% / Coffee 3% / Meats 8% / Other 2% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin needed | 7.9% |
| Operating margin (mid-cycle) | 12.8% |
| Margin compression implied | -4.9pp |
| Trailing margin (depressed year) | -18.7% |
| Multiple paid | 15x mid-cycle operating income |
The operating-margin requirement is derived from the framework's value band at year 12, a separately labeled basis from the headline growth/duration solve.
The price sits below what even a 5%/yr operating-profit decline would warrant; the inversion reports a bound, not a solved growth path.
Solve inputs: computed at a 7% cost of capital with 4% terminal growth over a 5-year stage (computed at the 7% minimum rate; the CAPM rate 6.1% sits below it).
Reconcile: at the x-ray's 9.3% required return this reads ~7.6%/yr; the models below use their own rates.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | +0.19σ |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.79x | 3 | justifies |
| Earnings | 0.91x | 2 | justifies |
| Relative | 0.60x | 3 | justifies |
| Growth | 1.24x | 4 | expensive |
Families that justify the price: Asset, Earnings, Relative, Growth
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 6.0%); the inversion above states its own rate.
Per-Model Detail (n=12)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $41.84 | 0.60x | yes | FCF base $3.9B, growth -2% (input: historical growth), terminal g 0.5%, WACC 6.0%, 5yr projection |
| DCF Exit Multiple | Growth | $31.64 | 0.79x | yes | Exit EV/EBITDA: 6.6x / 8.6x / 10.6x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $42.07 | 0.60x | yes | P/S fallback (negative EPS): Sector P/S 2.0x × TTM revenue — excluded from consensus |
| Simple DDM | Growth | $5.99 | 4.19x | yes | DPS $1.60, g=-13.7% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3% |
| Two-Stage DDM | Growth | $-19.71 | — | no | Stage 1: -200% for 5yr, Stage 2: 3.5% perpetual |
| Simple Excess Return | Asset | $35.29 | 0.71x | yes | Reference only (book value floor): BV/sh $35.29, ROE negative |
| Two-Stage Excess Return | Asset | $31.76 | 0.79x | yes | Reference only (book value with convergence): BV/sh $35.29, ROE converges to ke |
| Discounted Future Market Cap | Growth | $14.89 | 1.69x | yes | Rev $25.0B, growth -2% (input: historical growth; tapered), Terminal P/S: 1.0x / 1.2x / 1.4x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $0.00 | — | no | Negative/zero EPS — earnings-based value floored at $0 |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $35.98 | 0.70x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $4.51B × (1−21%) / WACC 6.0% → EPV (no growth) |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | — | — | no | — |
| EV/EBITDA Relative | Relative | $49.38 | 0.51x | yes | EBITDA $5.33B × sector EV/EBITDA 14.0x |
| FCF Yield | Earnings | $22.50 | 1.12x | yes | FCF $3945.0M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | — | — | no | — |
| ROIC-Justified P/B | Asset | $9.20 | 2.73x | yes | BV $35.29 × (ROIC 1.6% / WACC 6.0%) |
| P/Sales Sector | Relative | $42.07 | 0.60x | yes | Revenue $24.99B × sector P/S 2.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | — | — | no | — |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $17.0b |
| Net debt / NOPAT (after-tax) | 6.84x |
| Net debt / operating income (pre-tax) | 5.41x |
| Interest coverage | 3.3x |
| Share count CAGR (buyback) | -0.9% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 12.8%); the trailing year was depressed.
Bullet Takeaways
At $23.71 (as of June 27, 2026) the market pays roughly 15x company-wide mid-cycle operating income for Kraft Heinz, a multiple low enough that the price sits below what even a 5% per year decline in normalized operating profit would warrant. Trailing earnings are buried under a 2025 impairment, so the through-the-cycle margin is the honest read.
2025 carried $9.3 billion of non-cash impairment charges and a net loss of $5.85 billion, then in February 2026 management paused the planned split into two companies, with the new CEO calling the challenges fixable.
The price is anchored to asset and earnings-power value, not growth: book value per share near $35 and an earnings power value near $35 both sit above the price, but the business is shrinking, with 2026 guidance for organic sales down 1.5% to 3.5% and adjusted operating income down 14% to 18%.
Bull Case
Start with where the price sits against the valuation methods, because the spread is the bull case. At $23.71 Kraft Heinz trades below almost every static frame that values it on what it already owns and already earns. Book value per share is about $35, the reference excess-return floors land near $32 to $35, earnings power value on a normalized five-year EBIT comes in near $35, and the sector relative methods on revenue and EV/EBITDA reach into the $42 to $49 range. The asset, earnings-power, and relative families all say the same thing: the stock is cheaper than the methods that ignore growth entirely. That is rare for a company with this much brand equity.
The reverse-DCF makes the discount concrete. The market is paying roughly 15x company-wide mid-cycle operating income, computed on the company's own through-the-cycle margins rather than the trough quarter, because trailing earnings are depressed by the 2025 impairment. That multiple sits below what even a steady 5% annual decline in normalized operating profit would warrant. In plain terms, the price already assumes the business keeps shrinking, so the bar to clear is low: stabilization, not a turnaround, would be enough.
There are real reasons stabilization is plausible. The portfolio is anchored by Taste Elevation brands, roughly 45% of the mix and led by Heinz and Philadelphia, the highest-margin and most globally durable part of the company, the same assets management once planned to house in a standalone Global Taste Elevation business with about $15.4 billion of net sales and $4 billion of adjusted EBITDA in 2024. Q1 2026 showed net sales of $6.047 billion, up about 1%, and net income of $799 million, evidence that the underlying business still generates substantial cash even mid-restructuring. The company competes on brand recognition and loyalty alongside product quality and innovation (FY2025 10-K, accession 0001637459-26-000009), and against a peer set of McCormick, General Mills, and Hershey, Kraft Heinz carries a stronger free-cash-flow base than its depressed headline suggests. At a price that embeds decline, the dividend near $1.60 and the cash generation give patient holders something to wait on.
Bear Case
The bear case begins with the competitors, not the multiple, because the disruption is what makes the cheap stock a trap. Kraft Heinz states plainly that its principal competitors are manufacturers and retailers with their own branded and private label products (FY2025 10-K, accession 0001637459-26-000009). That is the heart of the problem. In packaged food, the most dangerous rival is not McCormick or General Mills; it is the store brand sitting next to Kraft on the same shelf at a lower price. The filing spells out the mechanism: if consumers perceive that the value or quality gap between Kraft Heinz products and private label has narrowed, the company could lose market share or volume, or see its mix shift to lower-margin offerings (FY2025 10-K). With inflation-strained shoppers trading down, that shift is already underway.
The 2025 impairment is the accounting confession that the brands are worth less than they were. The company took $9.3 billion of non-cash charges and posted a net loss of $5.85 billion. Those write-downs flow from the firm's own discounted-cash-flow tests, where management cites sustained expectations of declining revenue growth in future years and decreased margin expectations as the drivers, using discount rates as high as the low teens and long-term growth rates that bottom out at zero (FY2025 10-K). When a company impairs its own marquee trademarks on a thesis of permanent decline, the market is right to discount the equity.
The forward numbers confirm the erosion rather than refute it. 2026 guidance calls for organic net sales to fall 1.5% to 3.5% and constant-currency adjusted operating income to drop 14% to 18%, with roughly a 100 basis point drag from reduced food-assistance benefits. And the strategic answer keeps changing: the split into two companies, pitched in September 2025 as the way to unlock value, was paused in February 2026 as new leadership reset the plan. Net debt sits near $17 billion against mid-cycle operating income near $3.2 billion, leverage above 5x, so the balance sheet limits how aggressively the company can buy back stock or reinvest its way out. A cheap multiple on a declining-volume staples business with impaired brands and a wavering strategy is the classic value trap shape.
Valuation
Kraft Heinz has to be valued on normalized earnings, because the trailing numbers are distorted. The 2025 impairment drove reported operating income deeply negative, so the engine prices the company on its through-the-cycle margins applied to current revenue, which puts mid-cycle operating income near $3.2 billion against an EDGAR trailing figure that is negative. Those are two different measurement bases, and the normalized one is the right anchor for a cyclical staples turnaround. On that basis the market pays roughly 15x company-wide operating income, below what even a 5% annual decline in normalized profit would justify, computed at a 7% cost of capital with conservative terminal growth.
The method families cluster constructively once normalized. The asset frames hold up: book value per share near $35 sets a reference floor, and the excess-return methods land near $32 to $35. Earnings power value, the zero-growth anchor on normalized EBIT, comes in near $35. The relative methods reach higher, sector EV/EBITDA near $49 and sector price-to-sales near $42, though those lean on peer multiples a declining-volume name may not deserve. The methods that fail are themselves the warning: residual income returns nothing because trailing return on equity is negative, the Graham Number and PEG are gated off on non-positive EPS, and the dividend-discount model breaks on a negative sustainable growth rate. The static value is real, but it depends entirely on earnings normalizing rather than continuing to erode.
The honest read is that this is value contingent on stabilization. The conservative methods clear the price only if mid-cycle margins are achievable, and 2026 guidance, adjusted operating income down 14% to 18%, points the other way for now. Net debt near $17 billion at above 5x normalized operating income removes the margin for error that a cleaner balance sheet would provide. The fair-value math says cheap; the trajectory says prove it first.
Catalysts
The dominant strategic catalyst is the on-again, off-again split. In September 2025 Kraft Heinz announced a plan to separate into two companies, a Global Taste Elevation business and a North American Grocery business, then in February 2026 it paused that plan, with new CEO Steve Cahillane saying the challenges are fixable and within the company's control. Any update on whether the split is revived, abandoned, or replaced with a different restructuring will move the stock directly, since the breakup thesis was the main value-unlock case.
Q1 2026 (reported May 2026) showed net sales of $6.047 billion, up 0.8% year over year, with organic net sales down 0.4% and net income of $799 million, a beat that nonetheless underscored ongoing profit pressure. The next quarterly prints test the turnaround against full-year 2026 guidance of organic net sales down 1.5% to 3.5%, including about a 100 basis point drag from reduced food-assistance benefits, and constant-currency adjusted operating income down 14% to 18%.
The recurring swing factors are volume, pricing, and the dividend. Watch whether private-label trade-down accelerates or eases, whether pricing can hold without further volume loss, and whether the roughly $1.60 dividend stays covered as adjusted operating income falls. Brand reinvestment and any further impairment tests are also worth tracking over the next 90 days as signals of whether management believes the portfolio has stabilized.
Sources: CNBC (split pause, Feb 2026), CNN Business, Yahoo Finance, Simply Wall St, StockTitan (Q1 2026 10-Q), The Motley Fool (Q1 2026 transcript), ChartMill.
Peer Cohorts (Per Segment, With Filing Citations)
International Developed Markets / Emerging Markets (reported)
- CAG (CONAGRA BRANDS, INC.)
- (no filing in the citation store)
- CPB (THE CAMPBELL'S COMPANY)
- (no filing in the citation store)
- SJM (THE J. M. SMUCKER COMPANY)
- (no filing in the citation store)
- MDLZ (Mondelez International, Inc.)
- (no filing in the citation store)
- GIS (GENERAL MILLS INC)
- (no filing in the citation store)
- HRL (HORMEL FOODS CORPORATION)
- (no filing in the citation store)
- POST (Post Holdings, Inc.)
- (no filing in the citation store)
- FLO (FLOWERS FOODS, INC)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.