Who knows exactly when Altria
How much Pepsi's loss is Kraft's gain remains to be seen, but the challenge is pretty apparent. Reported revenue was up 3.4% this quarter, and though "organic" revenue growth was closer to 5%, volume growth was more moderate (though still up). Adjusted operating income growth of 9% was certainly an improvement as well, but again not really the sort of performance that will get analysts all giddy.
That's not to say that there aren't pockets of strength from which to build. Coffee performed well this quarter, helped in part by premium products like Starbucks-branded coffees. Consumer meat products also did well, with Oscar Mayer posting double-digit revenue growth, while companies like Hormel
Although the new CEO, Irene B. Rosenfeld, was pretty cagey about future plans, it's pretty clear that growth and more mix-shift toward premium products are high priorities. Unfortunately, everyone from Kellogg
I suppose there's a chance that Kraft Foods could ultimately replace Altria in the Dow once the spinoff is complete, but that's not enough of a reason to buy these shares. This is a huge company in a slow-growing sector, and Rosenfeld certainly has her work cut out for her. Barring operational improvements that boost the return on capital into the double digits, I see no reason to put this one in the shopping cart of food stocks.
For more Foolish food for thought:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).