Kraft (KRFT) Falls Amid Velveeta Shortage Rumors

NEW YORK (TheStreet) -- Kraft Foods (KRFT) fell 0.8% to $53.47 Wednesday on news of a shortage of Velveeta cheese.

According to an Ad Age report some grocery stores has reported shortages of Velveeta. One Brooklyn grocery employee said a "plant issue" is responsible for the shortage and the store isn't expecting new shipments until February.

The shortage comes at the start of the NFL playoffs when Velveeta is in high demand. A Kraft spokesperson said the high popularity of Velveeta means "consumers may not be able to find their favorite product on store shelves over the next couple of weeks." The company expects the interruption is a short-term issue, however.

TheStreet Ratings team rates Kraft Foods 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 notable return on equity, growth in earnings per share and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins."

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

  • Compared to other companies in the Food Products industry and the overall market, KRAFT FOODS GROUP INC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has improved to $508.00 million from having none in the same quarter last year. Since the company had no net operating cash flow for the prior period, we cannot calculate a percent change in order to compare its growth rate with that of its industry average.
  • The net income growth from the same quarter one year ago has exceeded that of the Food Products industry average, but is less than that of the S&P 500. The net income increased by 7.3% when compared to the same quarter one year prior, going from $466.00 million to $500.00 million.
  • The gross profit margin for KRAFT FOODS GROUP INC is currently lower than what is desirable, coming in at 33.98%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 11.37% is above that of the industry average.
  • The debt-to-equity ratio is very high at 2.06 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with the unfavorable debt-to-equity ratio, KRFT maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.

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