Kraft (NYSE: KFT) had one heck of a second quarter. It was a lot better than I thought it would be. As Melly Alazraki reported in her Before the bell post on Monday, Kraft managed to demolish analyst expectations by delivering 58 cents per share to the bottom line, a number that no only represented a 16% growth but that was 8 cents better than what Wall Street analysts were looking for. Overall, net revenues soared over 21%, while organic-revenue growth came in at roughly 7%. Not bad at all.
Even with the hellish inflation of input costs dogging it, Kraft managed to engage a price-increasing strategy that not only defended the bottom line but helped it thrive. How could it do this? Brand power, my friends. Looks like investors underestimated that power, and the fact that people are willing to pay more for the things they love.
Of course, it might be understandable that investors would not be willing to credit Kraft and its portfolio with such earnings-beating potential considering that there's so much competition out there from generic brands and that fuel costs are eating into supermarket budgets. Yet, the numbers support Kraft's current strategies. Volume wasn't too negatively affected in my opinion, and the margins turned out to be just fine -- something investors love to see when inflation is out front every single day in the headlines.
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