Kraft Announces Superb Quarterly Results

The Street vs. Tyler Smithson

Kraft Q1 Results

Actual Q1 Revenue:  $11.30 Bil

Actual Q1 EPS:  $0.49

Kraft blew away Wall Street projections today, with first-quarter revenue coming in 3.25% above consensus.  This represents a 20.5% year-over-year increase and a 2.7% quarter-over-quarter increase.  Likewise, EPS also came in above expectations with an 8.16% surprise.

Figure 1

	Actual	Tyler Smithson	Difference	The Street	Difference
Revenue	$11,318	$11,155	1.44%	$10,950	3.25%
Q1 EPS	$0.49	$0.48	2.04%	$0.45	8.16%

While Kraft’s earnings were a big surprise for Wall Street analysts covering the company, for my followers and I, results were pretty close to expectations.  As evidenced by Figure 1, I was significantly closer on both measures.  While the Street was off 3.25% on Q1 revenue, my estimates were less than have that difference—only 1.44%.  When the focus is turned to EPS, the differences become much more extreme.  Analysts were off an appalling 8.16% and I was only off a fourth of that, or 2.04%! 

Wall Street analysts should be hiding right now given their subpar predications.  It is apparent that their method of analysis employs, to a great extent, “SWAG.”  I was first introduced to this term by one of my graduate finance professors at Missouri State.  “SWAG” is an acronym for “Scientific Wild-A$$ Guess.” 

Those looking for accurate and unbiased earnings estimates, look no further than Smithson Equity Analysis.  Be sure to click the “Follow” button in the upper-right portion of your screen so you can be the first to catch all of my new posts.

I haven't decided which company I'll be analyzing next, but I'd be happy to consider any suggestions. 

 

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Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

How Will The Day Shape Up for Kraft?

Analysis of Kraft’s Upcoming Quarterly Results

Kraft will report earnings after the bell today, May 6^th.  Current Street consensus has first-quarter revenue increasing 16.5% year-over-year and EPS stable at $0.45.  My estimates, on the other hand, are slightly higher on both measures, with revenue expected to come in at $11.16 Bil and EPS at $0.48. 

The first step in my analysis was to create regression models that could accurately predict last quarter’s (Q4) sales figure.  The usual suspects were once again used, including First-Order, Autoregression, Dummy Coding, and Deseasonal models.  Each model was compared to actual sales and an average was created.  This average overestimated the data at first, but when I removed the effects of Autoregression, the result was only 0.005% off, as can be seen by Figure 1.  This is remarkably close!  I then used these same statistical models to predict the upcoming quarter's sales number.  The result was $11.16 Bil.  Figure 2 shows how this estimate was formed. 

From this point, I then proceeded to create a common-size income statement by compiling data from the past eight quarters.  After pouring over hundreds of pages of past company filings, I arrived at my current line-by-line income statement.  Based upon the resulting Net Income figure, EPS came to $0.48, or $0.03 above current Street consensus. 

Figure 1

Q4 Accuracy
Model	Prediction	Percent Err.	W/ St. Err.	Percent Err.
First-Order	$10,684.8	3.09%	$11,243	-1.98%
CFO	$10,754.0	2.46%	$11,325	-2.72%
Deasonal	$10,691	3.03%	$11,382	-3.23%
Dummy	$10,752	2.48%	$11,325	-2.72%
AVERAGE	$10,720	2.76%	$11,319	-2.66%
	AVERAGE	$11,019	0.05%

          

Figure 2

Q1 Prediction
Model	Prediction	W/ St. Err.
First-Order	$10,935.4	$11,479
CFO	$11,038.3	$11,589
Deasonal	$10,735	$11,405
Dummy	$10,754	$11,305
AVERAGE	$10,866	$11,444
	AVERAGE	$11,155

While I am predicting that costs will rise quarter-over-quarter, the increase in sales should overcompensate.  We’ll find out for sure at approximately 3:00 pm CST this afternoon.

If you like what you’ve been reading, I encourage you to click the “Follow” button in the upper-right portion of your screen so you can quickly catch all of my new posts.  Remember, those with quick and accurate information slaughter those without.

KFT Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

Q1 Earnings Estimates for Kraft

I’m short on time, but I wanted to get this out as soon as possible.  There’s more to come…

Kraft Q1 Earnings Estimates

Q1 Revenue:  $11.16 Bil

Q1 EPS:  $0.48

Income Statement
Three months ended March 31, 2010
Revenue	$11,155
Cost of Sales	$7,128
Gross Profit	$4,027
Operating Expenses:
M.A.R.	$2,651
Amortization	$7
Misc	-$15
Total	$2,643
Income from Operations	$1,384
Interest Expense	$336
Income before Taxes	$1,048
Provision for Income Taxes	$326
Noncontrolling Interest	$2
Net Income	$719
Diluted EPS	$0.48

Current Street consensus has Q1 Revenue at $10.95 Bil and Q1 EPS at $0.45.  Both of my estimates are slightly higher.  There is a wide range of predictions among analysts, so tomorrow afternoon’s report should be very interesting.

Don’t forget to click the “Follow” button in the upper-right portion of your screen.  Also, please feel free to comment at anytime!

KFT Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.