Analyst cites unsustainable leverage and dividend payout ratios after $600 million growth investment plan.
Bernstein downgraded Kraft Heinz (NASDAQ:KHC) to Underperform from Market Perform and reduced its price target to $21 from $25. The move follows CEO Steve Cahillane’s announcement of a $600 million investment in marketing, pricing, and product renovation efforts.
The firm projects the investments will push Kraft Heinz’s 2026 leverage ratio to 3.8 times and the dividend payout ratio to 60%. Rising commodity costs and limited pricing power were cited as key risks. The company recently adjusted its portfolio priorities, shifting frozen foods to a “Hold” category while upgrading hydration products.
Kraft Heinz stated no specific divestiture plans are in place, emphasizing a focus on higher-margin growth categories.