Kraft Foods Group, Inc.: An Earnings Preview

Kraft Foods Group (NASDAQ: KRFT  ) is set to report earnings on Thursday. Here's what you need to watch for in the company's results.

Earnings expectations
The first issue that needs to be addressed is whether the packaged food and beverage giant met Wall Street's expectations. Analysts peg profits for the maker of Oscar Mayer, Maxwell House, and Jell-O at $0.76 per share this quarter. Kraft booked EPS of $0.76 in the first quarter last year, meaning no change is expected in year-over-year profit growth.

Organic growth
Kraft's revenue grew 2.3% in the fourth quarter of last year. Quarterly increases partly stemmed from successful innovations in on-demand coffee and growth in Kraft and Cracker Barrel cheeses as well as Philadelphia cream cheese. A surge in earnings for the fourth quarter was attributed to favorable comparisons with retail inventory reductions due to the October 2012 spinoff from Mondelez International. Kraft expects its full-year 2014 revenue growth to come in at or above that of the overall North American food and beverage market.

Outcomes from profitability-boosting efforts
Since the corporate breakup from Mondelez, Kraft's management has prioritized profit above revenue growth. As a result, Kraft has operated as a more cost-efficient organization, focusing on metrics like free cash flow and return on invested capital. After cutting jobs and trimming expenses, the company possesses a leaner cost structure.

So far, Kraft's profitability-boosting efforts appear to be paying off. The company expected its full-year 2013 free cash flow to come in at $1.2 billion, up from a previous $1 billion estimate. Instead, Kraft posted $1.5 billion in free cash flow for 2013. However, while this figure reflects improved inventory and payables management, $600 million of it is attributed to the impact of pension plan contributions.  

Foolish final thoughts
When Kraft releases its quarterly results on Thursday, I'll be watching to see if and how the packaged food and beverage powerhouse achieved sales growth. I'll especially be looking for improvements to profitability as well as indications as to how Kraft intends to expand these metrics in the coming quarters.

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