Kraft’s third quarter profit beat Wall Street expectations, but the company posted weaker-than-expected revenue and cut its full-year sales forecast on Tuesday. Timothy Ramey, vice president and senior research analyst at D.A. Davidson & Co. shared his analysis on the firm’s earnings.
“The market is really hoping that Kraft shows some signs of organic growth, and organic growth was only up a half a percent this quarter, so it stalled out,” Ramey told CNBC. “[It] certainly had great margin expansion, but the topline was pretty anemic.”
Ramey has a “buy” rating on Kraft and has a $33 price target in the next 12 to 18 months. His 5-year price target for the company is $45.
“I did maintain the buy—I don’t feel it’s a very high conviction buy, but the stock is cheap,” he said. “It has a 4 percent dividend yield.”
The world’s second largest food company also announced on Tuesday that it will not overpay for Britain’s Cadbury.
“Paradoxically, this announcement makes it less likely that [Kraft] will go out and do something ill-advised on Cadbury,” he said.
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Ramey has investment clients who own shares of Kraft.