Deutsche Bank (DB) raised its price target on shares of Kraft Foods Inc. (NYSE:KFT) to $39 from $37, while retaining its "Hold" opinion on the stock.
The bank views splitting into 2 companies as improving the chances of creating LT value, but said it updated SOTP analysis suggests this is largely be discounted.
"With a continued heavy cash cost to effectuate such change, we see the stock as fairly valued in the high $30s or perhaps c. $40 until SnackCo / GroceryCo show meaningful FCF improvement," DB wrote in a note.
"Kraft reported opr. EPS of $0.59 vs. our $0.55 est. Results excl. $0.13 of 1-time items. Sales increased 4.1%, ahead of our 2% est., reflecting Developing market success and some Easter benefits. EBIT of $1.9 bil was slightly above our forecast, again tied to Developing markets," the bank said.
"Upside risks: volume out-performance, cost savings, less inflation (dairy, grains), tax efficiency. Downside risks: competition (branded, pvt label), high inflation, split execution," DB wrote.
Northfield, Illinois-based Kraft Foods makes packaged food products worldwide. Its primary brand portfolio includes Oreo, Nabisco, and LU branded biscuits; Milka and Cadbury branded chocolates, among others.
The stock lost 24 cents or 0.61% to trade at $39.35 on Friday. Over the past year, shares have been trading between $31.88 and $39.99.