Kraft's domestic business lacks bite: JP Morgan
The Cadbury acquisition will eventually help Kraft Foods Inc with added sales and patient investors will find it an attractive investment, but a lackluster performance in its domestic market made JP Morgan Securities downgrade the company's stock.
March 21, 2011 / 19:27 IST
The Cadbury acquisition will eventually help Kraft Foods Inc with added sales and patient investors will find it an attractive investment, but a lackluster performance in its domestic market made JP Morgan Securities downgrade the company's stock.
The brokerage also took the company off its US Equity Analyst Focus List, and said business in North America was still a concern as was Kraft's ability to deal with pricing."The company's performance in its North American market continues to languish, with market share and product velocity issues that will not be quickly resolved, in our view," JP Morgan analyst Terry Bivens wrote in a note to clients, downgrading the company's stock to "Neutral" from "Overweight"."Cadbury, meanwhile, will apparently require more time to generate the top-line acceleration that Kraft envisions," the analyst said.Even though the organic growth rate of Kraft's North American unit has improved, Bivens said Kraft would find it difficult to go ahead with its planned price rises - a must in the current environment - without sacrificing market share.In February, the maker of Maxwell House coffee, Velveeta cheese and Oreo cookies cut said it would raise prices of its products again. It had already upped prices on more than half of the products it sells in North America.The company said it was expecting some shoppers to be put off by the repeated price rises, and cut its 2011 forecast for earnings growth.Kraft shares had closed at USD 30.99 on Friday on the New York Stock Exchange. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
