The board of directors at
Kraft Foods Group, Inc.
) recently authorized a $3 billion share buyback program - the
first since it separated from
Mondelez International Inc.
(MDLZ) and became an independent company in October last
The share repurchase program has no expiration date. Also, the
quarterly dividend of 52.5 cents per share will be paid on Jan
17, 2014, to shareholders of record as on Dec 27, 2013.
At the time of separation from Mondelez, Kraft's management
announced its aim to generate significant cash. The consumer food
company is targeting to "put dollars in shareholders' pockets,
not margins". Free cash flow is expected to be at least 85% of
the net income in the long term which will be used mainly to pay
steady, incremental dividends targeted to grow consistently in
the mid single-digit range. The company expects to end 2013 with
free cash flow of $1.2 billion.
Though Kraft is focusing on building shareholders' value
through share buybacks and regular dividend payments, it has been
struggling with its top line. Sales were significantly weak in
the last reported quarter (third-quarter 2013). Several of the
company's product categories witnessed softness in the quarter
due to consumption weakness and increased competitive
In fact, Kraft missed the Zacks Consensus Estimate for both
revenues and earnings in the third quarter. Though the new
aggressive share buyback plan will boost earnings in the future
quarters, we believe the top line will continue to struggle.
Kraft carries a Zacks Rank #3 (Hold). Overall, we are
encouraged by Kraft's aggressive cost reduction and
efficiency-improvement initiatives which provide more cash to
invest in innovation, brand building and marketing initiatives.
However, despite Kraft's cost-saving efforts consistently
boosting earnings, it needs to show sustained improvement in the
Other better-ranked stocks in the food industry include
The Hain Celestial Group, Inc.
Green Mountain Coffee Roasters, Inc.
United Natural Foods, Inc.
). All the three companies carry a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
KRAFT FOODS GRP (KRFT): Free Stock Analysis
UTD NATURAL FDS (UNFI): Free Stock Analysis
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