Altria Group Inc (MO)

[EZ2]

P.S.'s mailbox has got to be jammed FULL !!!!

Indie Research
Kraft Issues Underwhelming Forecast and Extends Restructuring Plan
Tuesday February 20, 1:23 pm ET
By the BullMarket.com Staff

In recent weeks, analysts have speculated on strategies that Kraft Foods (NYSE: KFT - News) might pursue following its upcoming spin-off from parent Altria Group (NYSE: MO - News), but today the food maker provided investors with some hard numbers, issuing forecasts for future results as well as further details on its ongoing restructuring, including plans for another round of layoffs.
Extending its ongoing plan to cut costs, Kraft now says it may eliminate up to 8,000 additional jobs, or 9% of its workforce, and shutter as many as 20 production facilities. Since 2004, Kraft has cut 5,500 jobs and closed 19 facilities. The company will take a one-time pretax charge of -$2.5 billion, and it expects the cuts to shave $700 million off of its costs.

Kraft also released guidance for this year and beyond. The company expects organic revenue growth of 3-4% in 2007, and earnings, excluding restructuring costs, of $1.75-1.80 per share. Analysts had been expecting Kraft to earn $1.92 per share, and the lower-than-expected forecast sent the company's shares down about -2.5% in midday trading. As part of its effort to spur growth, Kraft will invest $300-$400 million in marketing, R&D, and other initiatives. Looking ahead, Kraft expects its 3-4% top-line organic growth to extend to 2008, and the company sees long-term organic growth of 4% and earnings growth of 7-9%.

As today's news indicates, Kraft is still very much mired in its ongoing restructuring plan, and the spin-off from Altria is only a small part of the Kraft story. Looking at Kraft's challenges also underscores how Altria is likely to be better off once the split is complete, as its core operations are far more solid than Kraft's. At the same time, once the spin-off is complete, Altria should soon be able to turn to new strategies for increasing shareholder value, potentially including acquisitions, buybacks, and the eventual spin-off of Philip Morris International (PMI).

Altria Group is a Bull Market Report Recommended List stock. It is up 110% since being added.

No member of the Bull Market Report editorial staff contributing to this article has any long or short positions in any company mentioned. Indie Research has a disclosure policy.

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