Morgan Stanley Reviews Kraft Earnings

In a report published Wednesday, Morgan Stanley analysts maintained an Overweight rating on

, with a price target of $94, after the company reported in-line 1Q results. The company reported its 1Q EPS at $0.72, in-line with expectations, with a small shortfall in organic sales being offset by lower A&P and tax rate favorability. Organic top-line growth stood at 1.1 percent, while sales growth came at 1.5 percent. "In our view, quality of earnings was relatively neutral, as both gross and EBIT margins were in line with our estimates, and lower interest expense/ tax rate contributed only modest favorability (~$0.02)," the analysts said. In the report Morgan Stanley noted, "Net, while Q1 results clearly could have been stronger, we are encouraged by MSD underlying EBIT growth, and believe the quarter is more than sufficient to sustain optimism surrounding both standalone Kraft's long-term margin prospects and the potential for the combined company to deliver upside to expectation." While Q1 results are unlikely to drive incremental confidence in Kraft's midterm prospects, the cautious commentary around Kraft's merger with

kept investors "potentially prepared for a weaker quarter," the report stated.