Morgan Stanley Resumes Coverage Of Kraft With OW Rating, $32 PT (KFT)
3/15/2010- Morgan Stanley analysts are resuming coverage of Kraft Foods (NYSE: KFT) with an "overweight" rating and $32 price target, which assumes that Kraft can trade at the average of the peer group on 2012 earnings estimates.
Analysts Vincent Andrews and Jaclyn Inglesby said, "KFT has materially underperformed its packaged food peers since its final offer for Cadbury (down 0.4% versus its peers up ~5% and the S&P 500 up 1.2%) and now trades at the low end of the group (11.3-times 2012E earnings vs. peers at 13.2-times). We believe KFT's performance and valuation more than reflect the low ROIC on the Cadbury acquisition (i.e., will not exceed WACC until 2012 despite consolidation as of February 2010), the integration risks ahead, and likely continued weak growth at heritage Kraft. At current levels, we see limited downside versus a greater likelihood of a ~15% total return by year-end."
Morgan Stanley sees fiscal 2010 EPS of $2.11, vs. consensus estimates of $2.07 per share, and fiscal 2011 EPS of $2.35, vs. consensus estimates of $2.33.
Write to Chip Brian at cbrian@tradethetrend.com
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