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If you've ever struggled to get the last bit of ketchup out of a Kraft Heinz (NASDAQ: KHC) glass bottle, you might begin to understand the headache investors holding the company's stock faced over the last few years. Shares have been stuck in a tight range since 2021 and are currently down about 4% in 2024, underperforming the broader market. The impact of shifting post-pandemic consumer spending trends while dealing with inflationary cost pressures has limited growth and earnings.

Still, there are some reasons to believe that the Kraft Heinz glass bottle is now half-full. The company's latest quarterly earnings showed signs of a budding operational and financial turnaround, supporting a positive long-term outlook.

So is Kraft Heinz a buy now? Here's what you need to know.

On a path back toward profitable growth

First-quarter results from Kraft Heinz were by no means exceptional, but there were enough strong points that deserve a closer look.

Adjusted earnings per share (EPS) of $0.69 climbed by 1.5% year over year, benefiting from a solid expansion in the adjusted gross margin, which reached 34.5% from 32.8% in the prior-year quarter. Efforts to raise pricing helped balance lower volumes while supporting profitability. Even as total revenue declined by 1.2% from Q1 2023, organic net sales fared a bit better, down by just 0.5%.

The company is focusing on an ongoing sequential improvement in volumes compared to weaker trends in 2023. Management believes the global operation is approaching a "volume inflection," with positive growth expected into the second half of this year. That theme plays into the 2024 outlook that has been reaffirmed.

Kraft Heinz is guiding for full-year positive organic net sales growth between 0% to 2%, with pricing initiatives contributing to the upside throughout the year. Similarly, adjusted EPS is forecast to increase in a range of 1% to 3%, capturing the expanding margins and steps toward financial efficiencies.

Kraft Heinz has good value and a compelling dividend yield

The potential that Kraft Heinz is returning to a path of profitable growth could be a big catalyst for the stock to rally higher.

Ultimately, the attraction of the company as an investment starts with its diversified global footprint and an extensive product portfolio that includes iconic brands like Kraft, Heinz, Philadelphia, Ore-Ida, Cool Whip, and Jell-O, among many others.

Those are likely just some of the reasons legendary investor Warren Buffett, through Berkshire Hathaway, remains the largest investor in Kraft Heinz, holding 326 million shares, or nearly 27% of the entire company.

For me, the stock appears to offer good value with its 4.6% dividend yield. That level is well above its industry group average, closer to 3.7%, from packaged foods peers like General Mills, Hormel Foods, and Campbell Soup.

Kraft Heinz has successfully managed to reduce debt in recent years, and consistent free cash flow, including in this last quarter, suggests the dividend payout is sustainable for the foreseeable future. Whether or not the stock breaks out higher right away, shareholders are getting paid to wait, and that's always a good thing.

The other metric that stands out is the company's price-to-earnings (P/E) ratio, trading at approximately 11.5 times the 2024 consensus EPS of $3.03. This earnings multiple is at a discount compared to packaged food peers like General Mills and Campbell Soup, which trade at a ratio around 14.6 times forward earnings.

For investors confident in a turnaround from Kraft Heinz, there's a case to be made that shares are undervalued and deserve a larger premium as it gets back on track.

KHC PE Ratio (Forward) data by YCharts

So is Kraft Heinz a buy?

I believe shares of Kraft Heinz could be a good addition to most investors' portfolios. The company went through some difficulties in recent years, but is well positioned to emerge stronger, with a more streamlined and efficient growth profile. It likely won't be a straight line higher for the stock, but I expect Kraft Heinz to deliver positive returns over the long run.

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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and J.M. Smucker. The Motley Fool recommends Kellanova and Kraft Heinz. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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