3 Things You Need to Know About Kraft's Earnings Release

Kraft Foods Group (NASDAQ: KRFT  ) provided investors with a financial update after Thursday's closing bell. Here's what you need to know about the company's recent earnings release.

1. Mixed bag of results
Kraft's profit rose in the second quarter, but its revenue slipped on weak sales of cold cuts, salad dressings, and Jell-O. The company attributed its drop in sales to a number of factors, including lowered beverage prices as a result of increased promotions. Pointing to a one-time benefit related to its pension plans, the maker of Oscar Mayer and Miracle Whip raised its full-year earnings outlook. Yet Kraft expects its 2013 revenue to grow at the same rate or slightly lower than the overall North American food and beverage market.

The decline in sales comes as Kraft looks to find its footing as an stand-alone company after splitting from Mondelez International last October. Kraft took the North American grocery business while Mondelez retained the higher-growth global snack business, including Oreo, Nabisco, and Cadbury brands. Since the corporate split, though, Kraft's stock is up an impressive 34%, vastly outperforming Mondelez's 20% return. By comparison, the overall stock market is up roughly 16% during that same period.

2. Management focused on the right measures
Like most mature consumer products companies, Kraft's management is prioritizing profitability over revenue growth. Since the spinoff, Kraft has focused on operating a leaner, more cost-efficient organization, by concentrating on return on invested capital and free cash flow. After cutting jobs and other expenses, the company has emerged with a much leaner cost structure. But Kraft is susceptible to volatile commodity costs and budget-conscious consumers, who're increasingly switching to private-label food and beverages. 

3. Its biggest challenges aren't going away
One of Kraft's largest threats is the changing landscape of the grocery market. Private-label and other big-branded competitors constantly pressure Kraft's highly commoditized categories. Since private-label goods typically cost consumers 20% to 40% less than branded ones, frugal customers increasingly fill their grocery carts with them. In order to effectively compete with private-label and other branded competitors, Kraft must relentlessly launch new products, distinguish their value proposition, invest in core brands, and fine-tune pricing strategies.

Foolish bottom line
Kraft faces a tough battle as it fights for market share and defends its brands in an increasingly commoditized food and beverage industry. Management appears focused on the right metrics, but time will tell if its efforts translate into long-term, sustainable results.

Do you love steady dividend stocks like Kraft? They can make you rich. It's as simple as that. Sure, they don't garner the notoriety of high-flying growth stocks, but they're less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.

 

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 04, 2013, at 10:14 AM, HalbachPaul wrote:

    "Kraft took the North American grocery business while Mondelez retained the higher-growth global snack business..."

    Higher-growth, but lower margin snack business. It's not easy being a growth co when your biz is selling chocolate to poor people in third world countries.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2576354, ~/Articles/ArticleHandler.aspx, 12/18/2014 3:34:03 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated Moments ago Sponsored by:
DOW 17,687.37 330.50 1.90%
S&P 500 2,049.56 36.67 1.82%
NASD 4,731.43 87.11 1.88%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

12/18/2014 3:18 PM
KRFT $62.91 Up +3.35 +5.62%
Kraft Foods, Inc. CAPS Rating: ****

Advertisement