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The board of directors at Kraft Foods Group, Inc. (KRFT - Analyst Report) recently authorized a $3 billion share buyback program — the first since it separated from Mondelez International Inc. (MDLZ) and became an independent company in October last year.

The share repurchase program has no expiration date. Also, the quarterly dividend of 52.5 cents per share will be paid on Jan 17, 2014, to shareholders of record as on Dec 27, 2013.

At the time of separation from Mondelez, Kraft’s management announced its aim to generate significant cash. The consumer food company is targeting to “put dollars in shareholders' pockets, not margins”. Free cash flow is expected to be at least 85% of the net income in the long term which will be used mainly to pay steady, incremental dividends targeted to grow consistently in the mid single-digit range. The company expects to end 2013 with free cash flow of $1.2 billion.

Though Kraft is focusing on building shareholders’ value through share buybacks and regular dividend payments, it has been struggling with its top line. Sales were significantly weak in the last reported quarter (third-quarter 2013). Several of the company’s product categories witnessed softness in the quarter due to consumption weakness and increased competitive activity.

In fact, Kraft missed the Zacks Consensus Estimate for both revenues and earnings in the third quarter. Though the new aggressive share buyback plan will boost earnings in the future quarters, we believe the top line will continue to struggle.

Kraft carries a Zacks Rank #3 (Hold). Overall, we are encouraged by Kraft’s aggressive cost reduction and efficiency-improvement initiatives which provide more cash to invest in innovation, brand building and marketing initiatives. However, despite Kraft’s cost-saving efforts consistently boosting earnings, it needs to show sustained improvement in the top line.

Other better-ranked stocks in the food industry include The Hain Celestial Group, Inc. (HAIN - Analyst Report), Green Mountain Coffee Roasters, Inc. (GMCR - Analyst Report) and United Natural Foods, Inc. (UNFI - Analyst Report). All the three companies carry a Zacks Rank #2 (Buy).

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