Christopher R. Growe
Stifel, Nicolaus & Co.
Kraft Foods Group (KRFT) reported what we view as a strong 1Q13 EPS performance with [diluted] EPS of $0.76, coming in a full $0.10 over our estimate and $0.12 above the consensus estimate.
1Q13 revenue growth of 2.1% on an organic basis was in line with our expectations but the company’s very diligent cost control (overhead, productivity, etc.) continues to support robust operating-profit growth and operating-margin expansion. Operating profit was up 9% in the quarter and up 17% on an underlying basis, speaking to the power of these cost-reduction activities.
We look to a strong gross margin improvement as the key to providing the flexibility for the company to continue to spend aggressively on marketing and R&D/new products.
We continue with our Buy rating and $55 target price. This quarter features an improving underlying sales performance that we believe provides some upside potential for earnings across the remainder of the year.
Janney Montgomery Scott LLC
Kraft Foods Group reported 1Q13 [basic] EPS of $0.77 compared to consensus $0.64 and our $0.65 estimate. Net sales increased 2.1% year over year vs. our 0.6% estimate, exceeding our estimate by $0.08 per share, net. Gross profit increased 4% year over year and beat our forecast by $0.05, while EBITDA increased 11% and beat by $0.12. The tax rate was favorable by a net $0.02 per share compared to our forecasts. FY13 guidance was unchanged for… $2.75 in GAAP EPS. We raise our FY13 EPS estimate to $2.77 from $2.76.