UBS Investment Research has downgraded its rating on Kraft Foods from ‘buy’ to ‘neutral’, in response to a number of factors it expects to hinder the company’s recovery, including higher commodity and energy prices.
UBS also lowered its price target for Kraft to US$32 from $37.
The investment bank said the second half of 2008 should have seen the beginning of Kraft’s sales and earnings traction, but factors outside the company’s control will neutralise this progress. Higher dairy prices, potential weakness in the European business, and problems in the US foodservice division will also inhibit growth, UBS said.
UBS has also lowered its price target for dairy group Dean Foods to $25 from $28, and lowered its 2009 earnings estimates for the company to $1.60 per share from $1.67 per share, as a result of anticipated dairy price rises next month.