Kraft Foods, Inc.

Kraft Foods, Inc. (KFT - Analyst Report) is winning customers with its popular food brands. The company has surprised on estimates 2 out of 4 quarters by an average of 7.03%. KFT is trading at 12.8x forward earnings.

Company Description

Kraft Foods is one of the world's largest food companies with sales in more than 150 countries. Founded in 1903 when J.L. Kraft started selling cheese from a horse drawn wagon, the company now has 9 brands with revenues over $1 billion including Kraft, Oscar Mayer meats, Maxwell House coffee, and Philadelphia cream cheeses.

Third Quarter Revenue Rose 7.1%

On Oct 29, Kraft Foods reported third quarter earnings that saw net revenue increase 19.4% to $10.5 billion with organic revenue climbing 7.1%. The growth came from pricing which added 8.4%. Volume was down 0.9%, primarily due to the impact of the cost-driven pricing actions.

Earnings per share, excluding items, was 44 cents which was the same as the third quarter of 2007 and in-line with analysts' estimates.

The company has established a marketing niche as a value alternative to eating out as consumers return to popular brand names, such as Kraft Macaroni & Cheese dinners, in this subdued economy.

2008 Guidance

Despite a tough economy, Kraft kept is 2008 EPS guidance unchanged at $1.88. It did, however, raise its 2008 organic net revenue growth to 7%, up from the previous forecast of 6%.

Consensus Estimates Holding Steady

Given the company's guidance for 2008, consensus estimates have been holding steady at $1.90 per share over the last 2 months, which is slightly higher than the company's forecast of $1.88. 2009 consensus estimates have moved up 2 cents to $2.00 in the last 60 days.

Kraft is scheduled to report fourth-quarter and full-year 2008 earnings on Feb 4.

Value Fundamentals

Kraft is a Zacks #1 Rank (strong buy) stock. It has surprised on estimates 2 out of the last 4 quarters by an average of 7.03%.

KFT is trading with a forward P/E of 12.75. Its price-to-book is 1.61. The company has a 5-year average return on equity (ROE) of 10.84%. Additionally, Kraft is paying a substantial dividend, with a current yield of 4.02%.

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