The Kraft Heinz Company (KHC) Q1 2026 [Q&A] earnings summary

Executive summary

• Net sales rose 0.8% year-over-year to $6.0 billion, with organic net sales down 0.4% due to unfavorable volume/mix despite higher pricing in all segments.

• Q1 2026 results exceeded expectations, with strong free cash flow and early market share gains from initial investments.

• Diluted EPS increased 13.6% to $0.67, while adjusted EPS declined 6.5% to $0.58, reflecting lower adjusted operating income.

• Business momentum is building, supported by a simplified operating model and increased investments in marketing, sales, and R&D.

• The sale of the Italy infant and specialty food business closed in Q1 2026 for $146 million.

Financial highlights

• Operating income fell 4.3% year-over-year to $1.1 billion, mainly due to higher advertising, inflationary manufacturing/logistics costs, and separation/restructuring costs.

• Adjusted operating income dropped 11.8% to $1.06 billion, primarily from increased costs and unfavorable volume/mix.

• Adjusted Gross Profit Margin was 34.1%, down 30bps from prior year; gross profit margin improved to 36.7%.

• Free cash flow surged 58.9% to $0.8 billion, with conversion reaching 111%, driven by working capital improvements.

• Net income attributable to common shareholders grew 12.1% to $798 million, aided by lower income tax expense.

Outlook and guidance

• 2026 outlook reaffirmed: organic net sales expected to decline 1.5% to 3.5% year-over-year, including a 100 bps SNAP headwind.

• Constant currency adjusted operating income projected to decrease 14% to 18%, reflecting $600 million in incremental investments.

• Adjusted EPS guidance set at $1.98 to $2.10; effective tax rate expected at 25%.

• Free cash flow conversion targeted at approximately 100%.

• Capital expenditures for 2026 are projected at $900 million, focused on maintenance, growth, and technology investments.