The Kraft Heinz Company (NYSE:KHC) has something many companies would love to have: brands that people already know. Heinz, Kraft, Philadelphia, and Oscar Mayer have been around for years and have a place in millions of households. That gives Kraft Heinz an advantage that is difficult for a new competitor to build.
The company also benefits from its scale. Its products already have broad distribution and plenty of shelf space in grocery stores. Consumers can switch to cheaper alternatives, of course, but familiar brands still give Kraft Heinz some pricing power and make it harder for smaller competitors to take share. Beyond its strong consumer following, the stock has also attracted seasoned investors such as Warren Buffett, who views it as a long-term investment.
The issue is that a strong brand portfolio does not guarantee strong growth. Kraft Heinz has been struggling with weaker volumes and lower earnings, so the valuation matters quite a bit. At roughly 11x forward earnings, the stock looks cheap. But that number needs some context. The multiple is actually higher than it was at the end of last year and earlier in 2026. So the real question is whether Kraft Heinz’s brands and earnings can support the price investors are paying today.
Kraft Heinz’s Forward P/E Looks Reasonable
The Kraft Heinz Company trades at about 11.15x forward earnings. That means investors are paying around $11 for each $1 of earnings the company is expected to produce over the next year. For a mature consumer staples business, that is not a particularly high valuation. The 7%+ dividend yield makes it even more interesting from an income perspective. Still, the stock is not as cheap as the headline number might suggest. There’s another packaged foods stock that offers a similar yield. Check here.
Yahoo Finance shows a forward P/E of 9.51x at the end of 2025, 10.96x at the end of March 2026, and 11.57x at the end of June. The current 11.15x multiple is below the June figure, but it is still above the level at which the stock started the year. There is also a reason not to put too much weight on the trailing P/E. The stock has a trailing P/E of 22.43x, but Kraft Heinz’s recent GAAP earnings were hit by significant impairment charges. That makes the trailing number look much less representative of the company’s underlying earnings power.
The Earnings Yield Makes the Valuation More Interesting
An 11.15x forward P/E translates into an earnings yield of roughly 9%. Put simply, investors are paying a price that represents about 9% of the company’s expected annual earnings. That looks pretty reasonable for a business with Kraft Heinz’s brands and scale.
The problem is that earnings have been moving in the wrong direction. In the second quarter, adjusted EPS fell 18.8% from a year earlier. Organic net sales were down 1.3%, while adjusted operating income dropped 18.4%. Those are not numbers you would normally associate with a company whose valuation is expected to expand. There was some better news from management. Kraft Heinz raised its 2026 adjusted EPS outlook to $2.03-$2.09 from its previous range of $1.98-$2.10. The company also improved its organic sales outlook and now expects a decline of 0.5% to 2%.
That does not mean the business is growing again. But it does suggest that management is becoming a little more confident about where earnings are headed.
The 7.21% Dividend Is a Big Part of the Story
Then there is the dividend. The company’s forward annual dividend sits at $1.60 per share, which works out to a yield of about 7.21% based on the current valuation data. For a large consumer staples company, that is a substantial yield.
What makes it more interesting is the company’s cash generation. Kraft Heinz produced $1.7 billion of free cash flow in the first half of 2026, up 10% from the same period last year. The relationship between the earnings yield and dividend yield is worth paying attention to as well. At roughly 9%, the forward earnings yield is only moderately higher than the 7.21% dividend yield.
In other words, a large part of the earnings investors are buying is already coming back to them as cash. That is attractive if income is the main goal, but it also leaves less money for the company to reinvest in the business, reduce debt, or pursue other opportunities.
The Biggest Question Is Still Earnings Growth
This is where the valuation gets a little more complicated. It is easy to look at an 11x P/E and call Kraft Heinz cheap. But a low multiple does not necessarily mean a stock is undervalued. Sometimes it simply means investors do not expect much growth. Kraft Heinz is a good example. Adjusted EPS fell 18.8% in the second quarter, and adjusted operating income declined 18.4%. At the same time, the company is putting more money into its brands in an effort to improve the business.
Management expects around $700 million of incremental investment in 2026. That could eventually pay off. Stronger brands and better execution could help Kraft Heinz improve volumes and regain market share. However, investors have not seen that improvement yet. For now, they are paying for the possibility that these investments will work. That is why the stock’s valuation should not be viewed in isolation. Kraft Heinz does not need to become a fast-growing company for the stock to work. It may simply need to stop losing momentum.
Is Kraft Heinz Stock Undervalued?
At around 11x forward earnings, Kraft Heinz does not look expensive. A roughly 9% forward earnings yield and a 7.21% dividend yield provide plenty of income at today’s valuation. But there is a reason the market is not assigning the company a much higher multiple.
Earnings have been under pressure, volumes remain weak, and Kraft Heinz is still trying to reignite growth. The company’s strong brands give it a solid foundation, but that foundation has not translated into strong earnings growth recently. That makes Kraft Heinz more of a value-and-income play than a growth stock.
If the company’s investments start working and earnings stabilize, the current multiple could end up looking too low. But if earnings continue to weaken, the 11x P/E may turn out to be less of a bargain than it initially appears. For now, the stock’s appeal comes down to a fairly simple trade-off: investors are getting a high dividend and a modest valuation, but they are also taking a bet that Kraft Heinz can eventually get its earnings moving in the right direction again.
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This article is originally published at Insider Monkey.
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