Kraft’s 44% leap in Q2 profits have caused analysts to raise their expectations for the number one US food company’s full year performance and share value has been driven up accordingly.
In a note to investors yesterday (25 July) JPMorgan food analyst Pablo Zuanic upgraded Kraft’s rating from neutral to overweight, suggesting that the company’s fundamentals are improving and adding that cost-cutting initiatives have gained momentum under new CEO Irene Rosenfeld.
He also said that a number of factors, such as “recent marketing investments, innovation and SKU rationalisation”, have contributed to “better-than-expected price mix gains.”
Meanwhile, second quarter profits also prompted Merrill Lynch’s Eric Serotta to raise his expectations for Kraft’s full year results. “Gross margins are likely to benefit from easier comps, lower cheese and coffee costs, recent pricing actions, and continued restructuring savings,” Serotta wrote in a research note, raising his EPS guidance from US$1.90 to $1.93.
However, Serotta did not up his 2007 EPS prediction of $1.95, stating: “We expect the company to reinvest the bulk of restructuring savings and other margin expansion to establish a stronger foundation for sustainable growth.”
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By GlobalDataKraft shares increased from a low of $31.13 to close at $32.56 yesterday, and have continued to modestly grow in value today – rising to $32.66 at time of press.
