Citigroup Raises Kraft Price Target on Cadbury Acquisition Synergies (KFT,CBY)
3/9/2010-Citigroup reiterated its Buy rating on Kraft Foods (NYSE: KFT) and raised its price target to $36.00 from $33.00 as the bank believes the company's recent acquisition of Cadbury plc (NYSE: CBY) will engender significant benefits.
Analyst David Driscoll, said, "We view Kraft's $21.4 bln. (firm value) purchase of Cadbury as a step in the right direction as it provides KFT with further exposure into high growth categories including chocolate, gum, and candy as well as high growth emerging markets where the company looks to take advantage of population and economic growth trends.
Driscoll continued, "KFT expects to realize significant cost savings as a result of the deal; reaching the co's targeted annual run-rate of $675mm by 2013; if realized, contributes meaningfully to EPS growth in outlying years and provides 120bps of op margin expansion by 2013. Additionally, we expect an additional $300mm in revenue synergies beginning in 2013."
For 2010, the bank expects Kraft to report EPS of $2.10, versus consensus estimates of $2.08.
Write to Chip Brian at cbrian@tradethetrend.com
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