Earnings Cheat Sheet: How Will Investors Digest Kraft Earnings?

Kraft Foods Inc. (KFT) is a world wide food and snack manufacturer.  The company manufacturers and markets everything from Nabisco and Oreo cookies to Kraft Mac & Cheese.  KFT is also the world’s second largest food company.  KFT has been criticized by Warren Buffett for buying Cadbury, but how is the company holding up in the third quarter?

Earnings: For the third quarter, KFT earned $754 million ( 43 cents per share).  Excluding Cadbury acquisition costs, KFT earned 47 cents per share.  This is a decrease from the $824 million ( 55 cents per share) earned in last year’s third quarter.

Revenue: Increased 26% to $11.9 billion in the third quarter.  Price increases and additional revenue from Cadbury were large contributors in the increase.

Actual versus Wall Street Expectations: Excluding acquisition costs, Kraft’s 47 cents per share beat estimates by one penny.  However, KFT did miss revenue estimates of $12.01 billion.

Notable Stats: Kraft is a market leader in the food industry.  More than 80% of  company revenues come from products that hold the No. 1 share position in their respective categories. Furthermore, more than 50% of revenue is driven by categories where our market share is twice the size of the nearest competitor.

Did You Hear That? “We had another good quarter, and we’re executing well.” said Irene Rosenfeld, Chairman and CEO. “Our global growth strategy of focusing on snacking and Power Brands gives us a clear path to top-tier performance. The Cadbury integration has proceeded smoothly and quickly, and we’re already benefiting from significant cost synergies. I remain confident that we will achieve our goals for 2010 and accelerate our growth in 2011.”

Commentary: Kraft appears to be a solid play for investors looking for a large consumer food company.  In the US, 99% of households contain a Kraft product.  Kraft can even be found in the Dow Jones Industrial Average.  Shares are trading down about 2% in after hour trading, but are up 15% YTD.

Disclosure: No position