Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Ticker Shock: Eight Reasons Kraft Looks Tastier Than Whole Foods

By

Wednesday's top stories and stocks with potential to move.

PrintPRINT
Ugh! I've got a sore throat today. Ricola!

Asian stocks sank overnight. The Hang Seng and the Nikkei were off 1.45% and 1.18%, respectively. European stocks were, however, in slightly positive territory earlier this morning. And here in the US, we're currently trading lower.

Here's what I'm focused on this morning:

Whole Foods (WFMI):
The stock was up more than 3 bucks in after-hours action on the heels of its third-quarter numbers.

The company beat estimates and indicated it's looking for $0.80-$0.82 a share in 2009, which is north of the $0.65-$0.70 it was previously looking for.

My thoughts:

1. I don't know what people are getting so excited about. It's great they've raised the estimate, but at the end of the day, we're talking about a company that trades at about 30.3 times that estimate (based upon last night's closing price). Not too attractive.

2. Sales in the period were up a whopping 2% and comp-store sales were off 2.5%. Really impressive (note sarcasm).

3. Even if the company put up right around a buck a share this year and blew out its outlook, it's still overpriced.

4. Insiders -- if you're reading this and think I'm wrong, the choice is yours. Let's see you step up to the plate in the mid to upper $20s.

For my previous take on Whole Foods, click here.

Kraft (KFT):
Here's a little something to chew on. Check out its second quarter.

Kraft put up $0.56, which was $0.02 better than expectations. And although its revenue number looked a bit on the light side, I think it will be overshadowed by its outlook.

This line in the release caught my eye and I suspect many others could end up honing in on it too, this morning: "Kraft Foods increased its guidance for 2009 diluted earnings per share to at least $1.93 versus the prior expectation of $1.88." (Note that the Street is currently at $1.93.)

Some thoughts:

1. I sense that this year's estimate is going to get a nice bump up in the next few days. I'm even beginning to feel that the current 2010 estimate of $2.09 is on the low side, too.

2. Whatever the case, paying in and around 14.7 times this year's estimate would be reasonable for a company like Kraft, which has a very promising future and enjoys prominence in the food space. It seems like a significantly better deal than Whole Foods (I don't mean to bash, but I'm having trouble letting it go).

3. There aren't too many people talking about it, but I don't want to look past the dividend.

4. My guess is the company will be testing its highs within the next few months. In fact, the mid $30s is where the stock would be more fairly valued at this point.

For my last take on Kraft, click here.
< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE