A Hold recommendation has recently been issued to food and beverage company Kraft Foods, Inc. (KFT) by Zacks senior food and beverage sector analyst Steven Ralston, CFA. Here's what his latest update had to say about it:
'Kraft Foods Inc. is in the fourth year of the Sustainable Growth Plan, which includes capacity rationalization, SKU reduction, and cost savings programs. The results have been unsatisfactory; therefore, management announced a new strategy to accelerate the company's growth, which will require significant up-front investments, leading to a decline in earnings.
'However, at the same time, the Board announced a significant $5 billion share repurchase program. Therefore, the Hold recommendation is maintained. We do not expect the stock to outperform until positive operational earnings comparisons are generated from the new restructuring plan, which was announced back in February.
'Though the company's spin-off from Altria Group (MO) should enhance the management's operational and decision-making abilities, it will also require additional costs in form of a higher tax rate and an increased number of diluted shares. The target price of $37.75 is based on a 21 P/E on trough earnings (our 2007 year-end earnings estimate).'
Read the full analyst report on KFT.
Read the full analyst report on MO.
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