Monday, February 7, 2011

Kraft Foods Inc. (NYSE: KFT): Q4 Earnings Preview 2010

Kraft Foods Inc. (NYSE: KFT), the world's second largest food and beverage company, is scheduled to release its fourth-quarter earnings after the closing bell on Thursday, February 10, 2011. Analysts, on average, expect the company to report earnings of 46 cents per share on revenue of $13.46 billion. In the year ago period, the company reported earnings of 48 cents per share on revenue of $11.02 billion.

Kraft Foods Inc., together with its subsidiaries, manufactures and markets snacks, confectionery, and quick meal products worldwide. It sells the products to consumers in approximately 160 countries.

In the preceding third-quarter, the Northfield, Illinois-based company's net income was $754 million, or 43 cents a share, from $824 million, or 55 cents per share, in the year-ago quarter. On an adjusted basis, the company earned 47 cents a share in the latest quarter. Revenue rose 26% to $11.86 billion from $9.40 billion. Analysts, on average, expected the company to report earnings of 46 cents per share on revenue of $12.01 billion.

At its last earnings call in November, Kraft reaffirmed its fiscal 2010 combined organic net revenues growth target to 3%–4% annually, reflecting the regularizing of Cadbury’s trade inventory practices and aggressive advertising expenditure. Kraft also re-affirmed fiscal 2010 earnings guidance (excluding one-time items) of at least $2.00 per share.

The company plans to deliver 5% or more organic revenue growth, earnings per share growth of 9% to 11% and expects margins in the mid-to high-teens over the next three years.

With its acquisition of Cadbury, the company has notably expanded its product portfolio and increased its annual revenue. In addition, the company has experienced robust growth in emerging markets, where the demand for cheaper, quickly produced food products is high.

However, continuing legal battle against Starbucks and rising commodity costs remain major. Prices are up due to tight supplies, especially in grains. Poor weather around the globe, especially in Russia, South America, and the United States has resulted in depleted stocks of corn, wheat, coffee, and sugar. Consequently, prices have skyrocketed and are impinging on many companies' margins. Kraft also faces challenges from superstores such as Wal-Mart (NYSE: WMT), which purchase goods at a lower wholesale rate and a lack of organic products.

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