Kraft Heinz Co (NASDAQ:KHC, XETRA:KHNZ) is scheduled to report second quarter earnings before the market opens on August 5, with investors expected to focus less on the quarterly results and more on whether improving market share trends are translating into more durable demand.
UBS forecasts adjusted earnings per share of $0.52 for the quarter, one cent below the Visible Alpha and FactSet consensus estimate.
The firm expects another quarter of top-line pressure but believes the key question will be whether recent share gains support the company's goal of returning to top-line growth by fiscal 2027.
"While we expect another quarter of pressured topline performance from KHC, we believe the primary focus this quarter will center less on the reported results and more on whether improving share trends are beginning to translate into a more durable improvement in demand, such that the company remains on track to deliver topline growth by fiscal year 2027," UBS wrote.
The brokerage noted that Kraft Heinz shares have risen 6.7% since reporting Q1 earnings, outperforming both the Consumer Staples Select Sector SPDR Fund (XLP) and US food peers over the same period.
UBS expects management to reaffirm its fiscal 2026 guidance, which calls for a net sales decline of 1.5% to 3.5%, an adjusted operating income decline of 14% to 18%, and adjusted earnings per share of $1.98 to $2.10.
For the full year, the firm projects an organic sales decline of 1.7%, slightly better than the Street expectation of a 2.0% decline. It forecasts pricing growth of 0.4% and a 2.1% decline in volume and mix. UBS also expects adjusted EPS of $2.08 for the year, near the upper end of the company's guidance range and one cent above consensus.
For the second quarter, UBS expects organic sales to decline 3.7%, compared with the consensus estimate for a 3.6% decline, reflecting continued weak retail takeaway trends during the period.
The firm forecasts North America organic sales to fall 5%, while International Developed Markets are expected to decline 2.2%. Emerging Markets are projected to remain a source of growth, with organic sales increasing 3.5%.
On costs, UBS believes Kraft Heinz is relatively well positioned despite ongoing inflation concerns across the packaged food sector.
"From a cost perspective, while inflation remains an area of debate across packaged food, we believe KHC remains largely insulated given its FY26 outlook already contemplates ~4% inflation, with hedging and productivity expected to offset much of the pressure," UBS wrote.
UBS maintained a ‘Neutral’ rating and a $25 price target on the stock, which traded hands at about $28 on Wednesday, describing the investment case as balanced until the company demonstrates that improving market share can translate into sustained top-line growth.
"Valuation remains attractive, but until KHC can demonstrate that these changes can result in durable top-line growth, we expect the investment case to remain a 'show me' story and view the risk/reward as balanced," the firm wrote.