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.
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.
Kraft Foods Group Inc. (KRFT): Read the Full
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