Q1 Preview:Amid Earnings, Kraft (KFT) Likely Range Bound Until Split Generates Cash

Kraft Foods Inc. (NYSE: KFT) shares are lower heading into its first-quarter 2012 report, expected out after the market closes Thursday.

Analysts are currently modeling Kraft to report EPS of 56 cents on revs of $13.0 billion. Numbers compare with EPS of 52 cents and revs of $12.6 billion reported in the same period last year and EPS of 57 cents and revs of $14.7 billion.

Shares of Kraft rose 2.5 percent through the quarter to $38.01 at the end of March. For a comparison, Kraft rose just 0.5 percent in the same period last year.

Data from Bloomberg has 15 analysts with a Buy on Kraft, five at hold, and one with a Sell rating. The Street's price target average is $43, with a low of $37 and high of $46.

Analyst Comments

• JPMorgan sees EPS of 59 cents. The firm is positive on Kraft into numbers, recently upgrading the stock from Neutral to Overweight. JPMorgan commented: "Besides our optimism about fundamentals, we also think Kraft will push hard to drive strong earnings into one of the most important investor events in its history: the pending separation of GroceryCo and SnackCo, scheduled for 4Q12."
  
  In addition, JPMorgan likes Kraft's GroceryCo. and its potential for a very robust dividend payout.
  
  
• Deutsche Bank expects EPS of 55 cents. Though the firm is positive on the split of Kraft, sum-of-the-parts analysis shows that, until SnackCo. and GroceryCo. produce meaningful free cash flow improvement, shares will be mostly range bound.
  
  The firm issued the following Points of Focus: "Quarterly fundamentals and quality may not be important to stock performance leading up to the split. This was in evidence when 4Q11 results were released. Consumer weakness will still likely prompt questions around the company’s trends in key markets along with inquires as to capital structure and specific growth/financial objectives."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Kraft's past performance at Streetinsider's Kraft's Income Statement.

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