What Happened?
Shares of packaged foods company Kraft Heinz (NASDAQ: KHC) fell 6.7% in the afternoon session after the company announced its plan to separate into two independent, publicly traded companies through a tax-free spin-off, with the famous investor Warren Buffett noting his ‘disappointment’ with the move.
The move aims to unwind the 2015 merger of Kraft and Heinz, a deal that has seen the company's stock lose approximately 60% of its value amid muted consumer demand. While Kraft Heinz's management stated the goal is to unlock shareholder value and allow each new company to focus on distinct strategic priorities, investors appear focused on the risks. The separation could lead to potential disruptions, unanticipated costs, and up to $300 million in dis-synergies (costs resulting from the split). The plan, viewed by some as an acknowledgment that the original merger failed to deliver expected growth, adds a layer of complexity and uncertainty. The transaction is expected to be completed in the second half of 2026.
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What Is The Market Telling Us
Kraft Heinz’s shares are not very volatile and have only had 1 move greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 6.5% on the news that the company reported weak fourth-quarter results: sales and EBITDA (a profit measure) fell short of Wall Street's estimates.
The weak sales performance was influenced by shifting consumer behavior and economic uncertainty, particularly in the U.S. Away From Home segment. On the other hand, Kraft Heinz beat analysts' EPS expectations this quarter. Overall, this quarter could have been better.
Kraft Heinz is down 15.3% since the beginning of the year, and at $26.07 per share, it is trading 27.9% below its 52-week high of $36.13 from September 2024. Investors who bought $1,000 worth of Kraft Heinz’s shares 5 years ago would now be looking at an investment worth $751.17.
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