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KHC Q3 Earnings Top Estimates, Emerging Markets Sales Rise
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Key Takeaways
KHC's Q3 earnings of 53 cents and sales of $6.12 billion beat estimates despite annual declines.
Emerging Markets sales rose 13.8%, while North America sales fell 3.4% amid softer U.S. retail demand.
KHC raises its 2026 EPS outlook to $2.07-$2.13 and narrows its organic sales decline forecast.
The Kraft Heinz Company (KHC - Free Report) reported third-quarter 2026 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate despite declining year over year. The performance reflected softer U.S. retail demand, unfavorable volume/mix and increased operating costs, partially offset by strong growth in Emerging Markets.
Adjusted earnings of 53 cents per share beat the Zacks Consensus Estimate of 43 cents but declined 13.1% year over year. Net sales decreased 2% to $6,115 million but exceeded the consensus estimate of $6,059 million. Organic net sales fell 1.1%, reflecting weaker North American performance.
Kraft Heinz Company Price, Consensus and EPS Surprise
The revenue decline included a 0.3-percentage-point unfavorable currency impact and a 0.6-percentage-point drag from divestitures. Pricing remained flat, as increases in Emerging Markets offset declines in North America and Europe and Pacific Developed Markets.
Volume/mix dropped 1.1 percentage points, primarily due to weakness in North American meats, sauces and refreshment beverages. Results also reflected an approximately 80-basis-point headwind from inventory pulled forward into the second quarter.
Adjusted gross profit decreased to $1,950 million from $2,015 million in the year-ago quarter. Adjusted gross profit margin contracted 40 basis points to 31.9%, mainly due to inflationary pressures in procurement and logistics, partially offset by productivity improvements.
Adjusted operating income declined 15.2% year over year to $939 million. Higher advertising expenses, unfavorable volume/mix, inflation and increased variable compensation expenses more than offset efficiency gains. Adjusted operating margin contracted 230 basis points to 15.4%.
Kraft Heinz's Segment-Wise Results
North America net sales plunged 3.4% year over year to $4,485 million. Organic sales decreased 3.2%, reflecting a 0.8-percentage-point pricing decline and a 2.4-percentage-point volume/mix contraction. Weakness in U.S. Retail and inventory headwinds were partly offset by growth in Canada and Away From Home. Adjusted operating income declined 10.5% to $911 million, primarily due to inflation, top-line performance and higher variable compensation expenses.
Europe and Pacific Developed Markets revenues fell 5.6% to $910 million. Organic sales fell 1.3%, comprising a 0.4-percentage-point pricing decline and a 0.9-percentage-point volume/mix decrease. Business exits in Australia and New Zealand weighed on performance, partially offset by volume-led growth in Europe. Adjusted operating income declined 32.8% to $96 million, reflecting higher marketing and compensation expenses and a noncash write-off of obsolete spare parts.
Emerging Markets revenues increased 13.8% to $720 million. Organic sales advanced 15.6%, supported by 7.2 percentage points of pricing growth and an 8.4-percentage-point volume/mix contribution. Indonesia contributed approximately 3 percentage points to organic growth. Adjusted operating income rose 22.5% to $81 million, aided by sales growth and productivity.
KHC's Investments Drive Operational Improvements
Kraft Heinz continued executing its approximately $700 million incremental investment plan focused on pricing, marketing, innovation and organizational capabilities. Year-to-date marketing spending increased approximately 25%, reaching 6.1% of net sales.
The company reported improving U.S. consumption trends. Condiments consumption growth accelerated to 4.3% in the third quarter from 2.5% in the first half, while Mac & Cheese consumption improved to 1.4% growth from a 1.3% decline.
Global Away From Home organic sales rose 2.6%, supported by growth across all regions. Market share trends also improved, with 31% of total revenues gaining or maintaining share year to date compared with 21% in 2025.
Kraft Heinz's Financial Position and Cash Flow
Kraft Heinz ended the quarter with cash and cash equivalents of $1,888 million, long-term debt of $17,085 million and total shareholders' equity of $35,975 million.
For the first nine months of 2026, operating cash flow declined 4.1% to $2,960 million. Free cash flow decreased 5.2% to $2,361 million, while free cash flow conversion improved 11 percentage points to 120%.
The company returned approximately $1,400 million to shareholders through cash dividends during the nine months. Its net leverage ratio stood at 3.1 times.
KHC Raises Its 2026 Earnings Outlook
For 2026, Kraft Heinz now expects organic net sales to decline 0.5-1.25% compared with its previous forecast of a 0.5-2% decrease. The outlook includes an approximately 100-basis-point headwind from reduced SNAP benefits.
Constant-currency adjusted operating income is still projected to decline 16-18%. Adjusted gross profit margin is now expected at the lower end of the previously projected 10-50-basis-point decline.
Adjusted earnings are now anticipated between $2.07 and $2.13 per share, up from the previous guidance of $2.03-$2.09. The upward revision primarily reflects a lower expected effective tax rate of approximately 23.5% compared with 24.5% previously. Free cash flow conversion is expected to remain around 110%.
The Zacks Rank #4 (Sell) stock has dipped 4.7% over the past three months compared with the industry’s decline of 3%.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS implies growth of 7.6% from the year-ago figure. LW delivered a trailing four-quarter earnings surprise of 22.1%, on average.
The J.M. Smucker Company (SJM - Free Report) , a leading manufacturer and marketer of branded food, beverage, pet food and pet snack products, currently carries a Zacks Rank #2 (Buy). SJM delivered a trailing four-quarter earnings surprise of 13.8%, on average.
The Zacks Consensus Estimate for The J.M. Smucker’s current fiscal-year EPS implies growth of 17.1% from the year-ago figure.
The Estee Lauder Companies Inc. (EL - Free Report) , one of the world's leading manufacturers and marketers of skin care, makeup, fragrance and hair care products, currently carries a Zacks Rank of 2. EL delivered a trailing four-quarter earnings surprise of nearly 26%, on average.
The Zacks Consensus Estimate for The Estee Lauder Companies’ current fiscal-year sales and EPS indicates an increase of 5.3% and 35.1%, respectively, from the year-ago period.
View the Zacks #1 Rank List
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KHC Q3 Earnings Top Estimates, Emerging Markets Sales Rise
Key Takeaways
The Kraft Heinz Company (KHC - Free Report) reported third-quarter 2026 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate despite declining year over year. The performance reflected softer U.S. retail demand, unfavorable volume/mix and increased operating costs, partially offset by strong growth in Emerging Markets.
Adjusted earnings of 53 cents per share beat the Zacks Consensus Estimate of 43 cents but declined 13.1% year over year. Net sales decreased 2% to $6,115 million but exceeded the consensus estimate of $6,059 million. Organic net sales fell 1.1%, reflecting weaker North American performance.
Kraft Heinz Company Price, Consensus and EPS Surprise
Kraft Heinz Company price-consensus-eps-surprise-chart | Kraft Heinz Company Quote
KHC's Quarterly Performance: Key Insights
The revenue decline included a 0.3-percentage-point unfavorable currency impact and a 0.6-percentage-point drag from divestitures. Pricing remained flat, as increases in Emerging Markets offset declines in North America and Europe and Pacific Developed Markets.
Volume/mix dropped 1.1 percentage points, primarily due to weakness in North American meats, sauces and refreshment beverages. Results also reflected an approximately 80-basis-point headwind from inventory pulled forward into the second quarter.
Adjusted gross profit decreased to $1,950 million from $2,015 million in the year-ago quarter. Adjusted gross profit margin contracted 40 basis points to 31.9%, mainly due to inflationary pressures in procurement and logistics, partially offset by productivity improvements.
Adjusted operating income declined 15.2% year over year to $939 million. Higher advertising expenses, unfavorable volume/mix, inflation and increased variable compensation expenses more than offset efficiency gains. Adjusted operating margin contracted 230 basis points to 15.4%.
Kraft Heinz's Segment-Wise Results
North America net sales plunged 3.4% year over year to $4,485 million. Organic sales decreased 3.2%, reflecting a 0.8-percentage-point pricing decline and a 2.4-percentage-point volume/mix contraction. Weakness in U.S. Retail and inventory headwinds were partly offset by growth in Canada and Away From Home. Adjusted operating income declined 10.5% to $911 million, primarily due to inflation, top-line performance and higher variable compensation expenses.
Europe and Pacific Developed Markets revenues fell 5.6% to $910 million. Organic sales fell 1.3%, comprising a 0.4-percentage-point pricing decline and a 0.9-percentage-point volume/mix decrease. Business exits in Australia and New Zealand weighed on performance, partially offset by volume-led growth in Europe. Adjusted operating income declined 32.8% to $96 million, reflecting higher marketing and compensation expenses and a noncash write-off of obsolete spare parts.
Emerging Markets revenues increased 13.8% to $720 million. Organic sales advanced 15.6%, supported by 7.2 percentage points of pricing growth and an 8.4-percentage-point volume/mix contribution. Indonesia contributed approximately 3 percentage points to organic growth. Adjusted operating income rose 22.5% to $81 million, aided by sales growth and productivity.
KHC's Investments Drive Operational Improvements
Kraft Heinz continued executing its approximately $700 million incremental investment plan focused on pricing, marketing, innovation and organizational capabilities. Year-to-date marketing spending increased approximately 25%, reaching 6.1% of net sales.
The company reported improving U.S. consumption trends. Condiments consumption growth accelerated to 4.3% in the third quarter from 2.5% in the first half, while Mac & Cheese consumption improved to 1.4% growth from a 1.3% decline.
Global Away From Home organic sales rose 2.6%, supported by growth across all regions. Market share trends also improved, with 31% of total revenues gaining or maintaining share year to date compared with 21% in 2025.
Kraft Heinz's Financial Position and Cash Flow
Kraft Heinz ended the quarter with cash and cash equivalents of $1,888 million, long-term debt of $17,085 million and total shareholders' equity of $35,975 million.
For the first nine months of 2026, operating cash flow declined 4.1% to $2,960 million. Free cash flow decreased 5.2% to $2,361 million, while free cash flow conversion improved 11 percentage points to 120%.
The company returned approximately $1,400 million to shareholders through cash dividends during the nine months. Its net leverage ratio stood at 3.1 times.
KHC Raises Its 2026 Earnings Outlook
For 2026, Kraft Heinz now expects organic net sales to decline 0.5-1.25% compared with its previous forecast of a 0.5-2% decrease. The outlook includes an approximately 100-basis-point headwind from reduced SNAP benefits.
Constant-currency adjusted operating income is still projected to decline 16-18%. Adjusted gross profit margin is now expected at the lower end of the previously projected 10-50-basis-point decline.
Adjusted earnings are now anticipated between $2.07 and $2.13 per share, up from the previous guidance of $2.03-$2.09. The upward revision primarily reflects a lower expected effective tax rate of approximately 23.5% compared with 24.5% previously. Free cash flow conversion is expected to remain around 110%.
The Zacks Rank #4 (Sell) stock has dipped 4.7% over the past three months compared with the industry’s decline of 3%.
Stocks to Consider
Lamb Weston Holdings, Inc. (LW - Free Report) , a leading global manufacturer, marketer and distributor of value-added frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year EPS implies growth of 7.6% from the year-ago figure. LW delivered a trailing four-quarter earnings surprise of 22.1%, on average.
The J.M. Smucker Company (SJM - Free Report) , a leading manufacturer and marketer of branded food, beverage, pet food and pet snack products, currently carries a Zacks Rank #2 (Buy). SJM delivered a trailing four-quarter earnings surprise of 13.8%, on average.
The Zacks Consensus Estimate for The J.M. Smucker’s current fiscal-year EPS implies growth of 17.1% from the year-ago figure.
The Estee Lauder Companies Inc. (EL - Free Report) , one of the world's leading manufacturers and marketers of skin care, makeup, fragrance and hair care products, currently carries a Zacks Rank of 2. EL delivered a trailing four-quarter earnings surprise of nearly 26%, on average.
The Zacks Consensus Estimate for The Estee Lauder Companies’ current fiscal-year sales and EPS indicates an increase of 5.3% and 35.1%, respectively, from the year-ago period.