Kraft Foods Group Inc. (KRFT): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Kraft reported dismal first-quarter 2014 results, missing the Zacks Consensus Estimate for revenues and only managing to meet the same for earnings. Lower effective tax rate, strong productivity savings and pricing gains were offset by weak volumes and higher advertising/marketing costs in the quarter. Shift in Easter timing, retailer inventory normalization and recent cut in federal food assistance hurt volumes during the quarter. In fact, Kraft's top line has been soft ever since the split from Mondelez due to broader macro pressures. Several of its product categories have been sluggish due to consumption weakness and stiff competition. In addition, rising food costs, increasing competitive pressures and challenging industry conditions concern us. However, Kraft's strong brand portfolio, aggressive cost reduction and efficiency-improvement initiatives keep our faith in the stock. Moreover, Kraft has significantly increased its advertising investments, new product activity and the quality of its marketing, which could result in better results in future quarters.

Overview:

Headquartered in Northfield, IL, Kraft Foods Group, Inc. (KRFT) is one of the largest consumer packaged food and beverage companies in North America. It sells branded products in beverages, cheese, coffee, refrigerated meals and grocery categories, mainly across the U.S. and Canada. Some of its popular brands include Kraft, Maxwell House, Oscar Mayer, Planters and JELL-O.

Kraft Foods Group was spun off from Mondelez International into a separate independent company on Oct 1, 2012, and consists of the North American grocery business of the old Kraft Foods.

Kraft's operating segments included Beverages, Cheese, Refrigerated Meals, Grocery and International & Foodservice. Effective from Jul 1, 2013, its reportable segments became Beverages, Cheese, Refrigerated Meals, Meals & Desserts, Enhancers & Snack Nuts, and Canada. The remaining businesses including Foodservice and other international businesses were clubbed under "Other Businesses".

Management's long-term growth targets include organic sales growth at or above market growth of the North American food and beverage industry, mid single-digit operating income growth and mid-to-high single-digit earnings growth.


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



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