Should You Buy Kraft Ahead of Earnings?

With shares of Kraft Foods Group (NASDAQ:KRFT) trading at around $51.49, is KRFT an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

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Let’s get right to it on this one.

Positives:

  • Productivity improvements
  • Higher net pricing
  • International expansion potential
  • Analysts like the stock: 11 Buy, 10 Hold, 0 Sell
  • Cost savings
  • Brand loyalty
  • New product rollouts
  • 3.90 percent yield (higher than peers)
  • Kraft Macaroni & Cheese revenue increased 11 percent year-over-year
  • Velveeta revenue increased 12 percent year-over-year
  • MiO seeing strong sales
  • Strong cash flow
  • Plans to reduce overhead

Negatives:

  • Poor debt management
  • Advertising costs increased 20 percent last year
  • Volume declines
  • Cautious management
  • Increased marketing expenses likely in future due to new product rollouts
  • Decline in revenue in 2012
  • Decline in earnings in 2012

For those who enjoy reading content in paragraph form, fear not, this classic form of writing will be offered in other sections (to a certain extent).

Now let’s take a look at some comparative numbers. The chart below compares fundamentals for Kraft, ConAgra Foods (NYSE:CAG), and Campbell Soup Company (NYSE:CPB). Kraft has a market cap of $30.40 billion, ConAgra has a market cap of $14.73 billion, and Campbell Soup has a market cap of $14.57 billion.

KRFT

CAG

CPB

Trailing   P/E

18.63

29.53

19.85

Forward   P/E

16.37

14.18

17.11

Profit   Margin

8.95%

3.48%

9.12%

ROE

16.29%

9.87%

62.08%

Operating   Cash Flow

$3.04 Billion

 $1.05 Billion

 $1.14 Billion

Dividend   Yield

3.90%

2.80%

2.50%

Short   Position

1.10%

1.50%

7.90%

 

Let’s take a look at some more important numbers prior to forming an opinion on this stock.