Kraft Foods Group (NYSE:KRFT) is set to announce its Q1 earnings on Tuesday, April 28. In this pre-earnings report we focus on the impact of economic conditions and rising expenses on Kraft. Mixed economic indicators could affect the company’s revenues, while expenses showed signs of ballooning in Q4 2014.
We have a price estimate of the Kraft’s stock of $64, which is significantly lower than the current market price.
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Mixed Economy in Q1 2015
The demand for packaged food and beverages is impacted by the economic well-being of consumers. However, early signs indicate that the U.S. economy underperformed somewhat in Q1 2015. While GDP growth data for Q1 2015 will not be out until late Q2, an early estimate by the Atlanta Federal Reserve put the figure around zero.  This would be a significant slowdown, considering that the Q4 2014 GDP annualized growth rate was 2.2%. 
Other economic metrics also portray mixed conditions. Employment by private firms decreased significantly in March; while they were expected to add 240,000 jobs, the reported figure was only 129,000, which was the slowest pace of growth since December 2013.  Consumer confidence also dropped in February and March, taking the overall consumer sentiment index from 98.1 in January to 93 in March.  This could cut into consumer spending, which in turn could affect Kraft’s revenues.
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