May 2, 2013 / 8:17 PM / 5 years ago

Kraft Foods profit beats Street, shares rise

(Reuters) - Kraft Foods Group Inc KRFT.O posted quarterly earnings that far exceeded Wall Street estimates on Thursday, as increased spending on some of its biggest brands paid off, sending the company’s shares higher.

Kraft macaroni and cheese products are seen on the shelf at a grocery store in Washington in this May 3, 2012 file photo. Kraft Foods Group Inc posted quarterly earnings that far exceeded Wall Street estimates on May 2, 2013, as increased spending on some of its biggest brands paid off, sending the company's shares higher. REUTERS/Jonathan Ernst/Files

Still, the U.S. maker of Maxwell House coffee, Oscar Mayer lunch meat and Planters nuts stood by its full-year forecast as it expects to continue investing.

“I don’t want you to think that we’re off to the races in terms of underlying profit and earnings growth,” said Chief Financial Officer Tim McLevish.

Net income was $456 million, or 76 cents per share, in the first quarter, down from $483 million, or 82 cents per share, a year earlier, before the company separated from Mondelez International (MDLZ.O).

Net revenue rose 2.1 percent to $4.55 billion.

Analysts on average were expecting earnings of 64 cents per share and revenue of $4.48 billion, according to Thomson Reuters I/B/E/S.

The company stood by its 2013 outlook for earnings of $2.75 per share on organic revenue growth in line with that of the North American food and beverage market.

Other food companies also reported quarterly earnings on Thursday, including Kellogg (K.N), Hillshire Brands HSH.N and Hain Celestial Group Inc (HAIN.O).


With Kraft separated from Mondelez, it no longer has exposure to high-growth emerging markets. It is instead pouring more money into its stable of mature North American brands, such as Velveeta cheese and Jell-O. It described some early successes.

    “We’re talking about 16 percent growth on Velveeta cheese,” said Kraft CEO Tony Vernon. “Who would have thunk it, right, years ago.”

    He said the company was “waking up sleeping giants” in areas like Kraft salad dressing, Oscar Mayer cold cuts and Miracle Whip to fend off aggressive competitors.

    “In select instances, defending our success may also mean getting sharper on price points, to show that we will not tolerate incursions into our market share or irrational behavior that would disrupt the long-term health of our categories,” Vernon said, meaning that the company would not let lower-priced competitors steal market share.

    He later qualified his stance, saying the focus is on more efficient spending on promotions, not greater promotions.

    Shares of the company rose 1 percent to $51.10 in after-hours trading. They closed at $50.53 on the New York Stock Exchange.

    Reporting by Martinne Geller in New York; Editing by Bernard Orr and Leslie Adler

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