AP News

Kraft shares up after 2nd-qtr results top Street

Kraft Foods Inc.'s shares jumped Friday after the food maker reported that its second-quarter profit beat market expectations.

THE SPARK: Kraft said after the market closed Thursday that its second-quarter profit rose 5 percent despite a dip in its revenue. The company trimmed costs and used higher prices to help offset unfavorable currency exchange rates, a shift in Easter shipments and a smaller line of products in North America.

Its adjusted earnings of 68 cents per share beat market expectations of 66 cents per share, according to FactSet. Revenue of $13.29 billion fell just short of analyst expectations.

The Northfield, Ill., company stood by its full year outlook.

THE BIG PICTURE: Kraft and other food makers are still dealing with rising costs for their ingredients. While most companies have raised prices to offset those pressures, it has taken some time to roll out all the increases Additionally, international companies are feeling the impact of a stronger dollar, as sales made overseas translate to fewer greenbacks at home.

Kraft is also in the midst of splitting its business into two independent companies — an international snacks business and a North American grocery business. It said that it expects to spinoff the grocery business Oct. 1. It also said that it has completed its leadership team for both companies, announcing board members and another management hire.

THE ANALYSIS: Citi analyst David Driscoll reiterated a "Buy" rating on the company's shares.

"Overall, we like the momentum we are seeing at Kraft, and we fully expect it to continue, whether the company is in one piece or two," Driscoll said in a note.

SHARE ACTION: Kraft's shares added $1.58, more than 4 percent, to $40.52 by midday. Its shares are setting new highs as they previously traded between $31.88 and $40.29 in the past 52 weeks.

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