CS First Boston: Kraft Takes the Cake

Analyst David Nelson is pleased with the food manufacturers' higher volume and new products

Credit Suisse First Boston upgraded Kraft (KFT ) to strong buy from buy.

Analyst David Nelson says fourth quarter results were in line with estimates, with high quality driven by 5.3% volume growth on a comparable basis. After weak volumes from Kraft, Sara Lee and Hershey Foods recently, Nelson notes Kraft's numbers are welcome. He says volume plus cost-cutting has provided power leverage to expand operating margins by 200 basis points. Volume was driven in large part by new product innovation, with new products accounting for $1.1 billion, or about 3% of sales. He says this is the lifeblood of any food company, and Kraft does it as well as anyone. He sees $2.02 2002 cash EPS.

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