Will Kraft Foods Beat Earnings in 1Q13? - Analyst Blog


Kraft Foods Group ( KRFT ) is set to report its first-quarter fiscal 2013 results on May 2 after the market closes. Last quarter, it posted a 90% positive surprise. Let's see how things are shaping up for this announcement.

Kraft Foods Group was spun off from Kraft Foods, Inc into an independent company last year in October. Kraft Foods Group includes the North American grocery business of the old Kraft Foods which has been renamed to Mondelez International ( MDLZ ), but now comprises only its global snacks business.

Factors to Consider This Quarter

The top line was quite weak in the fourth quarter due to the difficult year-ago comparisons and volume declines (due to retailer inventory shifts and more product pruning). Kraft Foods was not much successful in raising prices either.

Management is not too bullish for the first quarter of 2013 as well given the difficult year-ago comparison which included some price increases that are not expected to be repeated in this quarter. Moreover, management does not expect a full recovery from the consumption declines seen in the fourth quarter of 2012.

However, like the fourth quarter of 2012, the first quarter's profits could see tailwinds from strong productivity gains and cost savings which can partially offset headwinds from the sluggish top line.

Earnings Whispers?

Our proven model does not conclusively show that Kraft Foods is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method ) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Zacks ESP is 0.0%.

Zacks Rank #2 (Buy): Kraft Foods carries a Zacks Rank#2 (Buy). However the Zacks #2 Rank when combined with a 0.0% ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement.

Other Stocks to Consider

Here are some other food companies you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:

Flower Foods Inc. ( FLO ), with Earnings ESP of +14.63% and a Zacks Rank #1 (Strong Buy).

J&J Snack Foods Corp . ( JJSF ), with Earnings ESP of +9.84% and a Zacks Rank #2 (Buy).

FLOWERS FOODS (FLO): Free Stock Analysis Report

J&J SNACK FOODS (JJSF): Free Stock Analysis Report

KRAFT FOODS GRP (KRFT): Free Stock Analysis Report

MONDELEZ INTL (MDLZ): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: FLO , JJSF , KRFT , MDLZ



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