Kraft Lifted by Established Brands and Emerging Markets Growth

Kraft Foods (NYSE:KFT) reported healthy revenue growth on the back of impressive performance by developing markets. For the full year, net revenue rose 11% to $54 billion. Developing countries registered a 16% rise in net revenues which now stand at $15.8 billion or close to 30% of the total revenues. The company reported a net income of $830 million or 47 cents a share, up from $540 million a year earlier. However, excluding special items, earnings were 57 cents a share. Kraft competes with players like PepsiCo (NYSE:PEP), General Mills (NYSE:GIS) and Kellogg (NYSE:K).

We currently estimate a $34.68 price for Kraft Foods. We are in the process of revising our estimates to incorporate the Q4 earnings.

See our full analysis for Kraft here

Kraft has benefited from Cadbury’s distribution networks in developing markets. For the full year, organic growth for biscuits was 9%, with developing markets witnessing a double digit growth. In developing markets, the company has stepped up the marketing spend of Oreo cookies and priced them competitively in order to appeal to mainstream public.

Earlier in February, Kraft also introduced belVita biscuits. Kraft’s market share in the broader snacks market is close to 14% and we expect a gradual increase in the figure as the company spreads its reach in the developing market.

Kraft continues to do well in chocolates with reported revenues registering a 16% growth. Organic growth for chocolates stood at 6% with developing markets again witnessing a double digit growth. Kraft operates in chocolates through Cadbury, Lacta and Milka, among others. Chocolates, Candy & Gum is the most important division contributing more than 23% to our price estimate.

It will be interesting to see how Kraft spins-off into 2 companies. Kraft expects to incur a one-time cost of $1.6 billion to $1.8 billion as a result of split.

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