This Warren Buffett Stock is Brushing Off a Double Downgrade, But is the Worst Over?

Kraft Heinz's (KHC) recent Q4 2024 earnings report triggered a 3.25% drop in the stock on Wednesday, as revenue fell short at $6.58 billion and the company delivered disappointing guidance for 2025. Organic net sales are projected to be flat to down 2.5%, and adjusted earnings per share (EPS) guidance of $2.63-$2.74 fell substantially below analysts’ expectations of $3.04.

Today, Bank of America responded with a double downgrade from “Buy” to “Underperform,” as analyst Peter Galbo warned that the company’s tepid organic sales guidance might still be too ambitious.

What's Behind BofA's Bearish Note?

“Unlike food peers who have reset EPS expectations with their initial FY25 outlooks this earnings season (HSY, MDLZ), KHC continues to have a revenue problem,” wrote Galbo. “If packaged food industry volumes normalize, we also see KHC as a laggard given portfolio composition.”

To Galbo’s point, Kraft Heinz is facing headwinds on multiple fronts - including unfavorable currency trends, price-sensitive consumers, and escalating ingredient costs - all while its Lunchables brand has suffered amid a Consumer Reports campaign regarding levels of sodium and lead in the pre-packaged meals. 

KHC Stock Recovers from 2-Year Lows

As a result of these challenges, KHC stock has underperformed, down nearly 20% in the past year. 

But in today’s trading, KHC is bouncing back from the two-year lows set in Wednesday’s session, which carried the shares well beneath their lower Bollinger Band. The stock is up more than 1% this afternoon, effectively shrugging off BofA’s double downgrade. 

Is This Buffett Stock an Overlooked Value Buy?

Analysts have grown notably cold on KHC stock in recent weeks. The consensus rating now stands at a “Hold” among the 18 analysts in coverage, down from “Moderate Buy” one month ago.

Likewise, legendary value investor Warren Buffett has famously said he was “wrong” about KHC stock. However, his Berkshire Hathaway (BRK.A) (BRK.B) equity portfolio still owns a 26.9% stake in the company worth nearly $9.5 billion. That makes KHC the No. 8 holding at Berkshire currently, just behind Occidental Petroleum (OXY).

One silver lining to Kraft Heinz stock's ongoing slump is the increase to its dividend yield. At the stock's current low levels, KHC yields 5.59% - making this a potential passive income pick, for investors who believe the longer-term decline may finally be drawing to a close.