Kraft (KFT - Free Kraft Stock Report), the giant packaged food manufacturer and Dow-30 component, has reported fourth-quarter results that were in line with our estimates and Wall Street's consensus, which left its high-quality shares little changed on the news. In fact, earnings of $0.57 a share for the December period were just a penny shy of our $0.58 call, mostly due to higher interest expenses, commodity cost headwinds, and tough business conditions in Europe. The bottom line still advanced a strong 24% on a year-over-year basis, as organic sales were up over 6%, and cost-management efforts paid off handsomely. The company also realized incremental cost savings related to its 2010 acquisition of British confectioner Cadbury, a transaction that has not only helped Kraft pare its overhead, but to gain valuable ground in emerging international markets, including the large BRIC countries (i.e., Brazil, Russia, India, and China).

Looking ahead, 2012 is expected to be another fine year for the company. Kraft sees organic sales rising more than 5%, despite ongoing challenges in Europe and pressure from initiatives, largely centered on the foodservice operations, aimed at pruning the North American product portfolio. In addition, share earnings are apt to be up at least 9%, to around the $2.50 level. This would be a pretty good showing, we think, at a time when many in the industry are being hampered by soft volumes in the U.S. It would also be a further credit to CEO Irene Rosenfeld, who has aggressively pushed for product innovation during her tenure.

In other news, Kraft is moving ahead with plans to split into two separate public entities later this year, with one company encompassing the growing global snacks unit and the other consisting of the more mature North American grocery division. The breakup, to take the form of a tax-free spinoff, is intended to unlock shareholder value and improve overall execution across all of Kraft's diverse businesses.

We continue to like these shares for conservative accounts with a long-term focus, though we are trimming our 2012 share-net call by a dime, to $2.50, to better reflect management's guidance. And we think that interested investors would do well to build positions now, since Kraft's businesses will likely be more expensive (on a P/E basis) after the aforementioned split is completed.

About The Company:Kraft Foods is the largest branded food and beverage company headquartered in the United States and the second-largest worldwide. The company markets many of the world’s leading food brands, including Kraft cheese, Maxwell House coffee, Nabisco cookies and crackers, Philadelphia cream cheese, Oscar Mayer meats, and Post cereals. While North America accounts for nearly half of the top-line mix, the food giant’s products are currently sold in more than 170 countries around the world. Among its more noteworthy acquisitions was the purchase of Nabisco in December of 2000 and Cadbury in February, 2010. 

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.