Kraft (KRFT, Financial) is on fire in 2015 as the stock is up over 35% YTD. The company’s great quarterly report and merger with Heinz has fueled the stock price, however the best may be yet to come. In Q4 FY14, Kraft reported earnings per share of $1.54, beating the consensus estimate of $0.61. The company detailed revenue of $4.6 billion versus the analyst estimate of $4.63 billion.
Innovations will drive growth
Kraft Macaroni & Cheese broadcast that, in January 2016, Original Kraft Macaroni & Cheese in the U.S. will no longer use artificial preservatives or synthetic colors while still providing the same delicious taste that people are familiar with and love from the iconic "blue box." Kraft Dinner in Canada will eliminate synthetic colors by the completion of next year in Kraft Dinner Original.
The company will use the ingredients derived from natural sources like paprika, turmeric and annatto instead of synthetic colors. To meet the needs of customer’s changing lifestyle, the company made this recipe change to delight them with more healthy and delicious products.
In 2014 in the U.S., Kraft Mac & Cheese Boxed Shapes tossed with six grams of whole grains per serving, decreased soaked fat by 25%, dropped sodium by 100 mg per serving and no synthetic colors. In Canada, Kraft Dinner Boxed Shapes tossed with no synthetic colors while Kraft Dinner Original has lowered sodium by 19% in the meantime 2012.
In 2015, Kraft Mac & Cheese Boxed Shapes in the U.S. decided to eliminate artificial preservatives from their products. All Boxed Shapes will be free from artificial flavors, preservatives or synthetic colors. Original Kraft Mac & Cheese relics a noble source of calcium with 10% of the suggested daily value and 9 grams of protein per serving.
Will Kraft benefit from Heinz merger?
The portfolio for the merged entity will comprise of diverse brands that will incorporate eight brands which are worth over $1 billion and about six brands worth between $500 million and $1 billion. Kraft Heinz, fifth-largest in the world –Â will claim a terrific collection of brands, counting barbecue sauce, Heinz ketchup and Philadelphia cream cheese.
The support to the brand portfolio will drive offer values upwards, as key brands and quality driving fragments for both organizations will get colossal supports. The synergies from the merger are required to prompt a $28 billion support to top line. The consolidated force of Heinz's prized ketchup line and Kraft's top notch cheese line, will drive the new organization's development developing forward.
Conclusion
Kraft is working on multiple fronts to drive growth and the stock is still attractively priced. With a forward P/E ratio of 24 and a dividend yield of 2.6%, Kraft warrants a buy rating. The company is nicely positioned to benefit from Heinz merger and will likely move higher in the foreseeable future.
