Kraft Heinz Co. 2Q OSG and EPS Beat — Though Increased OSG Outlook Has Little Flow Through to Earnings Due to Stepped Up Investments

Research evidence excerpt

J P M O R G A N

North America Equity Research

05 August 2026

Kraft Heinz Co.

2Q OSG and EPS Beat — Though Increased OSG

Outlook Has Little Flow Through to Earnings Due to

Stepped Up Investments

Underweight

KHC, KHC US

Price (04 Aug 26):$26.64

Food Producers & Retailers

Overall: Solid. KHC reported a sizable 2Q organic sales growth beat (-1.3%,

versus Consensus -3.6%) and $0.03 of EPS upside. The company raised its 2026

OSG outlook by over 1% at the midpoint (to -2% to -0.5%) but it now sees adjusted

operating income growth in the lower half of its prior range of -18% to -14% Y/Y,

largely because it now plans for $700MM in incremental spending in 2026 (up

$100MM from its prior outlook). In the earnings transcript, KHC noted that US

retail sales has ~80 basis points of timing benefits, while away from home sales

growth had ~150 basis points of non-recurring benefits (World Cup and prior year

laps). For 3Q, KHC’s OSG guidance of -2.5% to -1.0% compares favorably to the

Consensus Metrix estimate of -2.4%, while its operating profit outlook of -25% to

-23% Y/Y in weaker than the consensus estimate of -16%. KHC’s earnings call

(Q&A only) is at 9AM ET.

2Q26 Review (see Figures 1-2). KHC reported adjusted 2Q26 EPS of $0.56,

above the Consensus Metrix estimate of $0.53. Organic sales growth was 1.3%, well ahead of the Consensus Metrix estimate of -3.6%, built on -2.6%

volume/mix (CM -4.5%) and +1.3% price (CM +0.8%). The adjusted gross

margin was 34.1% (CM 33.5%). This gross margin upside was offset by higher

SG&A, so the EPS beat was driven by below-the-line items (other income and

tax). Among segments, OSG beat across the board, especially in Emerging

Markets, while operating profit in North America and Emerging Markets came

in ahead of estimates, offset mainly by higher corporate expense.

2026 Guidance (Figures 3-4). KHC raised its annual organic sales growth

outlook to -2.0% to -0.5%, up from -3.5% to -1.5% (vs. CM -2.0%). For EPS,

the company narrowed its range to $2.03-2.09, versus its prior outlook of

$1.98-2.10 (vs CM $2.07). The company now expects its investments to total

$700MM (up from $600MM) and gross margin to decline 10-50 bps Y-Y

…