Kraft Needs More Than A CEO
Stocks: (MO)(KFT)(CPB)(K)
One signal not immediately apparent with Kraft's decision to replace its CEO is that it is likely that the effort to improve the company's financial fortunes is off-track. The news cannot be good for shareholder of Altria, which owns a controlling interest in Kraft and is preparing to issue Kraft shares to Altria holders, based on a report in the Wall Street Journal.
The company's track record has been wanting. Operating income in 2003 was over $6 billion. In 2005, despite a slight increase in revenue over 2003 and 2004, operating income fell to $4.8 billion.
On April 25, Kraft said that its guidance of 2006 was still good with EPS from continuing operations of between $1.55 and $1.50. Wall St. has to wonder why the CEO is gone two months later. In the first quarter of the year, revenue was up less than 1% to $8.12 billion. That's not much of a turnaround.
At other company's in Kraft's industry, revenues are rising faster, a sign that Kraft's troubles are still not behind the firm. Campbell's revenue rose from $1.736 billion in its April quarter last year to $1.836 this year. Campbell's stock is near its 52-week high. Kellogg's first quarter sales rose from $2.572 last year to $2,727 this year. The stock is also near its high.
Kraft recently announced it would cut 8,000 more jobs, but because revenue is not growing, investors do not seem to be impressed.
Over at Altria, financial results, which are good in its tobacco operations, have been dragged down by the results at Kraft. When Kraft was spun out as a public unit, the theory was that because tobacco litigation might severely damage Altria, investors would at least have the food unit to keep them financially whole. At tobacco suits have mostly gone Altria's way, it appears, in hindsight, that the move was unnecessary.
Maybe Altria should just take Kraft back. With Kraft's stock down from about $36 in late 2004 to $31 now, and Altria's stock up from about $60 to $72 in the same period, maybe Altria should just take the food company back.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies he writes about.
One signal not immediately apparent with Kraft's decision to replace its CEO is that it is likely that the effort to improve the company's financial fortunes is off-track. The news cannot be good for shareholder of Altria, which owns a controlling interest in Kraft and is preparing to issue Kraft shares to Altria holders, based on a report in the Wall Street Journal.
The company's track record has been wanting. Operating income in 2003 was over $6 billion. In 2005, despite a slight increase in revenue over 2003 and 2004, operating income fell to $4.8 billion.
On April 25, Kraft said that its guidance of 2006 was still good with EPS from continuing operations of between $1.55 and $1.50. Wall St. has to wonder why the CEO is gone two months later. In the first quarter of the year, revenue was up less than 1% to $8.12 billion. That's not much of a turnaround.
At other company's in Kraft's industry, revenues are rising faster, a sign that Kraft's troubles are still not behind the firm. Campbell's revenue rose from $1.736 billion in its April quarter last year to $1.836 this year. Campbell's stock is near its 52-week high. Kellogg's first quarter sales rose from $2.572 last year to $2,727 this year. The stock is also near its high.
Kraft recently announced it would cut 8,000 more jobs, but because revenue is not growing, investors do not seem to be impressed.
Over at Altria, financial results, which are good in its tobacco operations, have been dragged down by the results at Kraft. When Kraft was spun out as a public unit, the theory was that because tobacco litigation might severely damage Altria, investors would at least have the food unit to keep them financially whole. At tobacco suits have mostly gone Altria's way, it appears, in hindsight, that the move was unnecessary.
Maybe Altria should just take Kraft back. With Kraft's stock down from about $36 in late 2004 to $31 now, and Altria's stock up from about $60 to $72 in the same period, maybe Altria should just take the food company back.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies he writes about.
posted by douglas mcintyre at 6:28 AM
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