Morgan Stanley sees upside for Kraft Foods after merger with 3G and Heinz

Morgan Stanley issued a report on Kraft Foods Group Inc.

on Thursday after the stock's strong reaction to the announcement of the company's merger with 3G and Heinz. Morgan Stanley reiterated Kraft Foods Group as Overweight while a price target is unavailable. Matthew Grainger and John Colantuoni, analysts at Morgan Stanley, wrote, "We view the deal very favorably, with Kraft now positioned to benefit from the operational acumen of 3G/Heinz, a period of accelerated synergy realization and earnings growth, and compelling international expansion opportunities going forward. We would also expect the combined Kraft-Heinz to remain a key driver of consolidation within US Food, creating the potential for further transactions and step-changes in its earnings power going forward. As a result, we remain optimistic on the company's prospects for growth." Morgan Stanley believes that the merger is a great opportunity to accelerate a process of cost reduction and consolidation. Aligning itself with 3G may allow Kraft to avoid the burden of significant leverage while offering flexibility for continued M&A and scale-building. Going forward there is a high potential for upside due to current synergy targets and a $1.5 billion cost savings goal. Currently Kraft Foods Group Inc. is trading at $84.01, up 1.01 percent.