Kraft Foods Group (NASDAQ: KRFT) will reach a new high this evening, but the company goes slightly after reporting its fourth-quarter results.
The packaged foods maker is one of many within the industry that has struggled to deal with a general decline in consumption.
"Things are tough out there," said Edward Jones & co. analyst Brian Yarbrough, who spoke to Benzinga before closing the market. "I think meet the number of earnings-or potentially beat ...--just because I think there is some operating margin expansion and some opportunities there. "
Kraft may have had the opportunity, but it might not have gone after them fast enough.
The company had announced a fourth quarter GAAP EPS of $1,54, which included a gain of $1,11. Without an official adjusted EPS, it seems that Kraft's earnings per share reach $ 0.43 (equals less $1,11 $1,54 $0,43), which is a bit shy of the EPS $(0.61) that Wall Street anticipated.
Revenue came to $4,6 billion, which was slightly below the estimated Street of $ 4.63 billion.
"We have made significant strides during our first full year as a public company," Kraft CEO Tony Vernon said in a statement. "Our focus on profitable growth while re-investing in our brand and people driving has delivered solid results to date and will also serve as we continue to redo Kraft in the best food and beverage company in North America."
Kraft said that its operating income from meals and desserts was partially offset by an increase in ad spending. The company also enjoyed "significant" overhead cost savings and productivity gains that offset the net prices of raw material costs and a two-digit increase in advertising.
Industry declines are still a mystery
No one was able to explain why the packaged food industry is under pressure. It is a problem that has baffled corporate executives for the last year, especially when other sectors in difficulty (e.g. restaurants) are taken.
Yarbrough said that some have blamed on reluctance of consumers to picture their pantries fully as they have in the past.
"Some say, is the lower-income consumer who is out there, struggling so are buying closer to need and you're not stocking up, '" said Yarbrough.
Others are worried that the Wal-Mart of struggling food Department could have a negative impact on food companies that rely on the dealer for more sales.
Store brands aren't having an impact
Store brands-how Wal-Mart's great value or Kroger's simple truth ... don't seem to have a negative effect on their more expensive competitors.
"Private label has earned a lot and there's a lot of people who moved to private label in economic recession, said Yarbrough.But I think that type of tide has shifted. I didn't see the tidal flow to where they are losing altitude, but I don't think you're growing either. "
This is all mostly speculation. Yarbrough said if "these managers who manage these companies do not know the motive behind [the decline], of course I don't know."
Warrior rising
Kraft may be soaring, but still up more than 18 percent in the last year and a half is more than 14 percent over the past 12 months.
In the past six months haven't been too kind to Kraft; could count the picture rose and fell several times that most investors.
Things were looking this month, however. The broth seems to be gradually moving away from its period of stagnation and rose more than four percent since Feb. 3.
Kraft is currently more than two percent in after-hours trading.
Verdict: Kraft is a manufacturer of powerful foods (but not waterproof)
Investors seem to be happy with the results of Kraft ...--for now. But keep an eye on how the market reacts in the next few weeks.
Disclosure: at the time of this writing, Louis Bedigian had no positions in stocks mentioned in this report.
-Published In: Brian Yarbrough Edward Jones co. & VernonAnalyst color news earnings Tony best of Benzinga(c) Benzinga.com 2014. Benzinga does not provide investment advice. All rights reserved.
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