TSC Ratings' Updates: Kraft

Kraft's revenue growth trails the industry average of 37.3%. Since the same quarter one year prior, revenues rose by 21.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.

The gross profit margin for Kraft Foods is 38.40%, which we consider to be strong. It has increased from the same quarter year over year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.50% trails the industry average.

Compared with where it was trading a year ago, Kraft's share price has not changed very much due to the relatively weak year-over-year performance of the overall market, the company's stagnant earnings and other mixed results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

Kraft has improved earnings per share by 9.1% in the most-recent quarter compared year over year. This company has reported somewhat volatile earnings recently, but we feel it is poised for EPS growth in the coming year. During the past fiscal year, Kraft reported lower earnings of $1.63, vs. $1.85 in the prior year. This year, the market expects an improvement in earnings ($1.93 vs. $1.63).

The company, on the basis of net income growth year over year, has significantly underperformed compared to the food products industry average, but is greater than that of the S&P 500. The net income increased by 3.5% when compared with the same quarter one year prior, going from $707 million to $732 million.