KRAFT FOODS GROUP INC. (Nasdaq symbol KRFT; www.kraftfoodsgroup.com) makes a variety of grocery products, including Kraft macaroni and cheese, Oscar Mayer meats, Philadelphia cream cheese, Maxwell House coffee, Jell-O desserts and Miracle Whip salad dressing.

Kraft gets all of its sales from North America, which limits its risk. Moreover, its well-established brands give it steady cash flow: 10 of its banners each generate annual sales of over $500 million.

The company took its current form on October 1, 2012. That’s when the old Kraft Foods Inc. broke itself into two publicly traded companies: Mondelez International (Nasdaq symbol MDLZ), which focuses on snack foods, and Kraft Foods Group.

If you assume the breakup occurred at the start of 2008, Kraft’s sales would have fallen from $17.7 billion in 2008 to $17.3 billion in 2009. Sales rebounded to $17.9 billion in 2010 and to $18.7 billion in 2011, but they dipped to $18.3 billion in 2012.

Earnings rose 34.9%, from $2.38 a share in 2008 to $3.21 a share in 2009. They then fell to $2.75 a share in 2012.

Stock market advice: Kraft raises dividend for first time since split with Mondelez

Following the split from Mondelez, Kraft began a major restructuring that mainly involves closing plants and making its remaining operations more efficient. It expects to spend $650 million on these initiatives by the end of 2013.
Savings from restructuring will let Kraft spend more to develop innovative products. In 2012, it spent $178 million (or 1.0% of its sales) on research, down 10.1% from $198 million (or 1.1% of sales) in 2011.

Still, it has recently launched several successful new products, including a zero-calorie Crystal Light drink mix and a version of its Philadelphia Cream Cheese with twice the protein of the regular product.

Kraft also plans to spend more on marketing. Advertising costs jumped 19.6% in 2012, to $640 million (or 3.5% of sales) from $535 million (or 2.9%).

As of June 29, 2013, Kraft’s long-term debt was $10.0 billion, which was 31% of its market cap. It also held cash of $1.2 billion, or $1.95 a share.

The stock has gained 18% since Kraft became a stand-alone company just over a year ago. The company has also just raised its dividend for the first time since the breakup. The new annual rate of $2.10 a share, up 5.0% from the old rate, yields 3.9%.

In the latest edition of Wall Street Stock Forecaster, we look at the progress of Kraft’s restructuring efforts. We also examine the company’s earnings outlook without Mondelez and whether the shares are likely to keep rising. We conclude with our clear buy-hold-sell advice on the stock.

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