KHC Q2 Earnings Call Raises Brand Spending on Early Traction

KHC Adds $100 Million to Brand Support

Chief executive officer (CEO) Steve Cahillane said Kraft Heinz raised incremental fiscal 2026 investments to approximately $700 million versus 2025. The extra $100 million will go almost entirely toward second-half marketing.

A JPMorgan analyst asked about the spending cadence. Cahillane said third- and fourth-quarter investment should be broadly even.

Global CFO Andre Maciel said management does not expect spending to wrap into next year. Fiscal 2026 is intended to establish the base while preserving flexibility across marketing, pricing and product support.

Kraft Heinz Sees Consumption Improve

Kraft Heinz raised its fiscal 2026 organic net sales outlook to a decline of 0.5% to 2.0%, compared with the previous forecast for a 1.5% to 3.5% decrease.

A Bank of America analyst pressed management on consumption. Global CFO Andre Maciel said the measure declined about 2.5% in the second quarter but improved to roughly negative 1% in July, with sequential progress expected through year-end.

The global chief financial officer said market share declined 30 basis points in the first half and about 20 basis points in recent weeks. Steve Cahillane cited better trends in Capri Sun, Mac & Cheese and Taste Elevation, while stressing that the turnaround remains unfinished.

KHC Directs Spending to Stronger Brands

An Evercore ISI analyst asked why Heinz, Capri Sun, Ore-Ida, Kraft Mac & Cheese and Philadelphia were receiving more support. Andre Maciel cited brand equity, attractive gross margins and more advanced innovation plans.

Heinz grew 3% worldwide and U.S. condiments have increased 3% year to date. Cahillane said Heinz grew 12% in emerging markets during the quarter, while global Away From Home returned to growth.

Results remained uneven elsewhere. The CEO identified Oscar Mayer Deli Fresh as a major weakness, though new packaging was nearly fully deployed. PowerMac reached about 35,000 stores and ranked in the first quartile of innovation performance.

Kraft Heinz Calls 2027 Inflation Manageable

A Barclays analyst asked whether expected inflation of 4% to 5% in 2027 threatened margin recovery. CEO Steve Cahillane said productivity would remain the first defense, and management intends to strengthen margins over time.

Second-quarter adjusted gross margin was flat at 34.1%. Adjusted operating income fell 18.4% as advertising, weaker volume and inflation outweighed efficiency gains and pricing.

Kraft Heinz expects fiscal 2026 constant-currency adjusted operating income to decline 16% to 18%. Adjusted earnings guidance was narrowed to $2.03-$2.09 per share from $1.98-$2.1.

KHC Protects Cash While Investing

Andre Maciel emphasized that higher spending has not changed the cash commitment. Year-to-date free cash flow is up 10.3% to $1.7 billion, and the conversion outlook has increased to approximately 110% from 100%.

Maciel also cited $1.9 billion of debt repayment during the quarter. Kraft Heinz paid $949 million in dividends during the first half.

A Wells Fargo analyst asked whether improving momentum created room for portfolio changes. Cahillane said management would consider transactions that add shareholder value, without outlining a specific action.

Kraft Heinz Keeps 2027 in Focus

Management's tone was confident about early traction but measured about the work ahead. North American demand remains pressured, the broader industry is soft and volume recovery is still developing.

Kraft Heinz is prioritizing sustained brand support, targeted pricing, innovation and productivity. Its near-term objective is to improve consumption and share through the second half and enter 2027 with a stronger operating base.

Zacks Signals Favor Value Over Growth

KHC carries a Zacks Rank #2 (Buy), with an A Value Score, C Growth Score, C Momentum Score and A VGM Score. The combined reading is favorable, while the individual scores show greater strength in value than in growth or momentum.

Zacks methodology favors Rank #1 (Strong Buy) and 2 stocks paired with an A or B Style Score. The current combination is constructive, but the Zacks Rank can change as earnings estimates are revised after the reported results.

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

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