Kraft Foods Earnings Preview: Second Quarter 2009

Kraft Foods [[KFT]] is scheduled to report their second quarter 2009 results after the market closes on Tuesday, August 4. Based on our analysis, we at EarningsPreviews.com are expecting KFT to report better than expected results that exceed Wall Street’s consensus expectations.

 

Analyst Expectations

We are forecasting revenues of $10.45 billion and EPS of $.55. This would represent a 7% decline in revenues from last year’s $11.18 billion in the same period. The current analyst consensus estimates calls for revenues of $10.35 billion and EPS of $.54.

 

Kraft should post better than expected second quarter results despite continued market share losses. While Kraft has benefited from the trend in consumers eating out less, their premium products continue to face tough competition from private label products.

 

Kraft continues to be one of the safer Dow stocks. The stock offers a current dividend yield of 4.1% and was one of the Dow’s better performing stocks in last year’s big meltdown. We also expect that concerns over market share losses will abate as the economy begins to recover and private label products become less attractive to consumers.

 

Share Performance

Since the beginning of the year, Kraft’s shares have gained nearly 6%. In 2008, KFT shares fell almost 18%, but still managed to outperform the 34% decline in the Dow Jones industrial average.

 

Valuation

Shares are now trading at 13.6x consensus 2010 EPS estimates. This is inline with the relative valuations of their peer group. We would expect Kraft’s stock price to continue to perform inline with the broader market with modest appreciation over the second half of the year.

 

Recommendation: Hold with a $30 price target.

 

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