Investing.com -- Bernstein downgraded Kraft Heinz (NASDAQ:KHC) to "Market-Perform" from "Outperform," saying the company continues to lose market share in key U.S. brands despite recent improvements in supply and a favorable comparison period ahead.
The firm pointed to ongoing volume declines in four major products that includes Lunchables, Kraft Mac and Cheese, Capri Sun, and Oscar Mayer.
While some short-term pressures, such as supply chain issues and negative publicity, are easing, Bernstein said the overall trend remains weak.
Three of these four categories themselves are flattish or growing, while KHC continues to lose volume and market share, the analysts said.
Lunchables is expected to lap the impact of last year’s negative Consumer Reports article, but private-label competition is gaining ground through lower prices.
Kraft’s Mac and Cheese continues to lose share to newer brands like Goodles and cheaper store-brand options, despite new flavor launches.
Capri Sun is showing some improvement after a 2022 innovation misstep, but competitors such as Ocean Spray are becoming more price competitive.
Meanwhile, the lunchmeat category remains under pressure from fast-growing private labels.
Bernstein said that nearly 60% of Kraft Heinz’s sales come from eight brands, including Heinz, Philadelphia, Velveeta, and Ore Ida, in addition to the four struggling ones.
The lack of a clear growth driver is a key concern for the firm.
The stock appears inexpensive in both absolute and relative terms, but analysts do not see a clear positive catalyst to drive the stock higher in the near term, according to the note.
Bernstein lowered its price target on Kraft Heinz shares to $31 from $34. It also reduced its EBITDA estimate for the Q5–Q8 period to $6.34 billion from $6.89 billion, while slightly increasing its valuation multiple.
