Kraft Foods Group (KRFT, Financial), the American grocery manufacturing and processing conglomerate, recently delivered a great quarter beating the estimates on all fronts.
The company was formed in 2012 as a spinoff from Kraft Foods Inc., which in turn was renamed Mondelēz International. The new Kraft Foods Group is focused mainly on grocery products for the North American market, while Mondelēz is an international distributor of Kraft Foods snacks and confectionery brands.
According to the previous quarter results, organic revenue escalated 3.4%, a successive progress from previous quarter.
1.5 points of growth were contributed by mix volume, while pricing was up around 2%. In North America, the company beat food and beverage industry development of approximately 2%.
In terms of productivity, fourth quarter gross productivity and net productivity was approximately 5% and 4%, respectively, and full-year net productivity of just over 2%, better than the October 2014 estimate. Lower spending and cost-saving initiatives drove the earnings in 2014.
The company ended the year with $79 million or $0.09 per share of unrealized losses from product evading activities, and a $1.3 billion or $1.14 per share non-cash loss from market-based influences the post-employment advantage plans.
A&C expenditure was down unevenly 12% for the FY14 compared to same quarter 2013. Advertising to sales result was down from 4.1% to 3.6%.
Moving towards earnings, EPS growth was additionally improved by an operative tax rate of coarsely 30% and 31% in the fourth quarter and full year, respectively.
The company claimed that its brands can be found in 98% of U.S. and Canadian households.
Benefiting from mergers
Both of the companies together, Kraft and Heinz, are performing very well. Together, they will govern eight brands that accomplish above $1 billion per year in sales, and five other brands that achieve between $500 million and $1 billion per year in sales.
Heinz, Oscar Mayer, Kraft, Philadelphia and Ore-Ida lie in the range of combined company’s brand. Some of the top well-known brands in packaged food manufacturing are combined by the merger. The combined company will have $28 billion in yearly trades.
In sync, Heinz and Kraft will be the third-largest food company in North America and fifth-largest brand in the world. It can be clearly observed from the results that this collaboration will lead them to grow further.
Kraft, which was once part of Altria Group (MO, Financial), has a past filled with a liberal dividend and yearly dividend growth. This strategy will be unaltered once it is converged with Heinz. The organizations noticed that the Kraft Heinz Company arrangements to keep up Kraft's present dividend per share of $2.20 and plan to expand it after some time. At current costs, this would liken to a yield of ~3.30% after the gigantic special dividend is paid out.
Conclusion
After a great quarter, Kraft is poised for further growth. The company’s merger with Heinz and a strong dividend yield make it an ideal pick. The company is currently underpriced and warrants a strong buy.
