Kraft Foods Inc. (KFT), the world's second-largest food company, is scheduled to report first-quarter results after the market closes Thursday.
The Northfield, Illinois-based company offers snacks, beverages, cheese and grocery as well as convenient meals and processed meats. Kraft markets its products under various brands, including Kraft cheeses, dinners and dressings, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House and Jacobs coffees, Nabisco cookies and crackers, Oreo cookies, Milka chocolates and LU biscuits.
The company operates three segments: Kraft Foods North America, Kraft Foods Europe and Kraft Foods Developing Markets. In fiscal 2009, of the total revenue of $40.386 billion, Kraft Foods North America generated $23.662 billion, Kraft Foods Europe brought in $8.768 billion and Kraft Foods Developing Markets contributed $7.956 billion.
In February, Kraft revealed the acquisition of British confectioner Cadbury plc (CBY, CBRY.L) in a friendly deal worth GBP 11.9 billion. The deal, expected to add $0.05 per share to 2011 earnings, will help Kraft expand its reach and also strengthen its product portfolio. The company is likely to provide an update on the Cadbury integration today.
Credit Suisse noted Monday that consumers are eating chocolates again. ''The acquired Cadbury business looks strong according to our Nielsen data. Cadbury and Kraft chocolate sales in Europe and the UK were up 10% over the past 52 weeks and were up 17% in the first quarter,'' the brokerage noted.
According to Credit Suisse, consumers have adjusted to the massive price increases for chocolates in the past two years, and sales will continue to surprise to the upside as the year progresses. "This is why Kraft wanted to buy the Cadbury business in the first place. Consumers have an emotional connection to the category that makes it more price inelastic and less commoditized than Kraft's heritage grocery businesses," the brokerage believes.
On average, 18 analysts polled by Thomson Reuters expect the company to have earned $0.45 per share in the first quarter, with estimates ranging between $0.40 and $0.50 per share. Revenue for the quarter is estimated to be $10.95 billion. Analysts' estimates typically exclude special items.
In the first quarter of the previous fiscal, Kraft's net earnings attributable to the company was $660 million or $0.45 per share. Earnings from continuing operations amounted to $662 million or $0.45 per share. Net revenues declined 6.5% to $9.396 billion due to unfavorable currency impact.
In the fourth quarter of 2009, the company reported net earnings of $710 million or $0.48 per share. Earnings from continuing operations for the quarter totaled $711 million or $0.48 per share. Net revenues for the fourth quarter grew 3.2% to $11.03 billion, due primarily to favorable currency impact.
Nestle (NSRGY.PK, NSTR.L), the world's largest food company, said late last month that group sales improved 4.4% in the first quarter, with growth witnessed in emerging as well as developed markets. The company continues to expect improvement in profit and revenue in fiscal 2010.
ConAgra Foods, Inc. (CAG), another packaged foods company, said in March that its third-quarter profit increased 18.8% from the previous year, helped by sales and profit improvement at its Consumer Foods segment. The company also affirmed its fiscal 2010 adjusted earnings outlook.
Kraft is likely to update investors today on what it thinks of its performance in 2010. Credit Suisse believes that Kraft will give very conservative guidance, when it reports earnings. The brokerage lowered its estimates on Kraft by 5 cents for 2010 and 2011. However, it added that "there is no change to its long-term thesis that this is the best operating margin expansion story in our space over the next 12 months. We think investors will have a unique opportunity to buy the stock at a discount price if it trades down on the news."
KFT closed Wednesday's regular trade on the NYSE at $29.75, up $0.18 or 0.61%, on 14.57 million shares. For the past year, the stock traded in the range of $24.40-$31.09.
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