Morgan Stanley Remains Overweight On Kraft Due To Achievable Synergy Targets

Morgan Stanley discussed Kraft Foods Group Inc KRFT after the stock's recent strength following the 3G/Heinz merger. Morgan Stanley reiterated its Overweight rating for Kraft and raised its price target from $67 to $94.

Analysts Matthew Grainger and John Colantuoni wrote, "We see continued upside driven by arguably conservative synergy targets, an improving top line outlook, and potential for further M&A...we view the combination of 3G's strong track record, potential synergy upside, and balance sheet optionality as offering further upside."

Over $1.5 billion in cost synergies are targeted by the two companies. While this may be aggressive, analysts believe that further overlaps with Heinz's existing cost structure could help push synergies above the company's $1.5 billion target. Morgan Stanley discussed that the structure of the merger will allow Kraft-Heinz to retain a modestly levered balance sheet and enable the company to consider further scale-building transactions going forward.

Shares of Kraft Foods recently traded at $88.50, up 1.6 percent.