Why Kraft Foods Gained Yesterday

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Kraft Foods Group (NASDAQ: KRFT  ) climbed 2% yesterday after Morgan Stanley upgraded the food giant from equal weight to overweight.

So what: Along with the upgrade, analyst Matthew Grainger raised his price target to $60 (from $55), representing about 12% worth of upside to Friday's close. While momentum traders might be turned off by the stock's sluggish performance in 2013, Grainger believes Kraft's steadily improving fundamentals should fuel a market-topping return in 2014.

Now what: According to Morgan, Kraft's risk/reward trade-off looks rather attractive at this point. "Upgrading KRFT to Overweight following YTD underperformance of ~750 bps," noted Morgan. "We are raising our PT to $60 as we expect robust productivity and restructuring efforts to support above-peer EPS visibility and rational reinvestment in 2014, and result in rerating versus US Food peers." With Kraft shares still off nearly 10% from their 52-week highs and sporting a 4% dividend yield, it's tough to disagree with Morgan's upgrade.

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