Will Kraft Foods (KRFT) Stock be Hurt Today by Product Recall?

Kraft Foods (KRFT) issued a voluntary recall of its original flavor Mac & Cheese dinners after customers reported finding metal in the boxes.
By Amanda Schiavo ,

NEW YORK (TheStreet) --Kraft Foods Group Inc. (KRFT) has issued a voluntary recall of approximately 242,000 cases, or 6.5 million boxes of its signature original flavor Kraft Macaroni & Cheese Dinner, due to the possibility some boxes may contain pieces of metal.

Kraft, a consumer packaged food company distributing products under a variety of brands, is famous for its popular Mac & Cheese dinners. The company said the recall is limited to the 7.25 oz. size of the original flavor boxed dinner with "Best When Used by" dates of September 18, 2015 through October 11, 2015 with the code "C2" below the date on the individual boxes.

Some of the dinners were also packages in multi-pack units with a range of different code dates and manufacturing codes on the product's external packaging. The recall effects products shipped to U.S. and several international customers, but excludes Canada.

Kraft said it was aware of eight incidents in which customers found metal pieces in the boxes. No injuries have been reported.

"We deeply regret this situation and apologize to any consumers we have disappointed," Kraft said in a statement.

Shares of Kraft closed at $61.70 on Tuesday afternoon.

Separately, TheStreet Ratings team rates KRAFT FOODS GROUP INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate KRAFT FOODS GROUP INC (KRFT) a HOLD. The primary factors that have impacted our rating are mixed some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and premium valuation."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 10.0%. Since the same quarter one year prior, revenues slightly increased by 2.2%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $1,140.00 million or 23.37% when compared to the same quarter last year. In addition, KRAFT FOODS GROUP INC has also vastly surpassed the industry average cash flow growth rate of -37.39%.
  • The gross profit margin for KRAFT FOODS GROUP INC is currently extremely low, coming in at 12.67%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -8.47% is significantly below that of the industry average.
  • You can view the full analysis from the report here: KRFT Ratings Report
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