It was a sleepy quarter for Motley Fool Income Investor recommendation Kraft
On a GAAP basis, net revenues were flat, coming in at $8.1 billion. Operating income declined 12% to $1 billion. Net income increased 41% to approximately $1 billion, or $0.61 per diluted share.
In this case, though, looking at the numbers according to generally accepted accounting principles doesn't show the whole picture. A lot of elements are affecting Kraft's income, among them tax benefits related to an audit of Altria
This was anything but a blowout quarter. Kraft reported that the operating margin was essentially the same as last time around -- and, of course, Fools would rather see increasing margins. The company is still coping with restructuring initiatives aimed at making it more efficient in a period of expensive commodities, so that costs can be contained. Kraft is also trying to position itself for future growth by focusing on core competencies. In fact, it recently sold its Milk-Bone asset to Del Monte Foods
As for guidance, the company is sticking to its forecast for the year in terms of earnings per share, but it does believe that it will have more cash to play around with. The sale of the Milk-Bone business, as well as the tax benefit, are the main drivers of this prediction. Free cash flow plus proceeds from divestitures should be around $3.4 billion for the year; Kraft previously was counting on $2.7 billion. This will allow the company flexibility in returning cash to shareholders and reinvesting for the long term. Cash is so cool, isn't it?
There are some negatives, such as declines in overall volume and challenges in certain territories. But one has to think of Kraft on a long-term basis. It has an enormous portfolio of popular brands that it can leverage to their full advantage during its realignment. Currently yielding a nice 3%, Kraft's stock will probably be a solid dividend player for years to come in an individual's investment program. The growth might be dull, but it nevertheless should yield fruit down the line.
Hungry for info about food stocks? Check these Takes out:
- Kraft's Confident Buyback Plan
- General Mills a Healthy Food Choice
- Steady Performance at Kellogg
- ConAgra Swallows Hard
If the thought of juicy dividends makes your taste buds tingle, serve yourself up a helping of Mathew Emmert's Motley Fool Income Investor service. It's yours to try free for 30 days.
Fool contributor Steven Mallas owns none of the companies mentioned. He does love Nabisco's Wheatsworth crackers, though. The Motley Fool has a disclosure policy.