Kraft Down, Altria Up In Wake Of Spinoff >KFT MO
DOW JONES NEWSWIRES
April 2, 2007 11:33 a.m.
By William Spain
Shares of Kraft Foods Inc. (KFT) headed down Monday in the first session after the company spun off from tobacco titan Altria Group Inc. (MO).
Kraft gave up 83 cents or 2.6% to $30.83 in recent action. Altria gained $1.90 or 2.9% to $67.80.
While the slow-growing food giant was widely expected to be shunned by many Altria investors, each of whom received 0.7 shares for each of their shares in the parent company Friday, some analysts expect the sell-off to be relatively short-lived.
The company's "eventual entry into the major indexes should offset in part the impact from active MO holders potentially dumping their KFT shares," wrote Pablo Zuanic of JPMorgan. He added that the same people "may also be deterred from selling immediately, given the recent drop in the share price from the mid-$36s to mid-$31s now."
He noted that H.J. Heinz Co. (HNZ) and ConAgra Foods Inc. (CAG), two other food behemoths, were among the best-performing stocks last year even though "neither was considered a growth story." Instead, they both were forced into "a more aggressive restructuring strategy," he said.
"We see similar ingredients in the (Kraft) investment story with arguably a stronger portfolio of brands and a more consistent international platform," Zuanic added.
For John McMillin at Prudential, "we think KFT may trade down a little on the spinoff. But as we hoped, it is now part of the (Standard & Poor's) 500 and that may limit selling by index-oriented accounts."
He recently bumped his rating on the stock to neutral weight and said he thinks it can at least hold the $30 level.
"We wonder whether the biggest impact of the distribution may be on other U.S. packaged-food stocks and investors have more to pick from now that 100% of Kraft is traded," he continued. "The S&P Food Index is currently about $150 billion in market cap and a complete...distribution adds about 30%."
Finally, "we think KFT trades sideways once the dust settles." |
