The Zacks Analyst Blog Highlights:MannKind, Kraft Foods Group, Mondelez International, Hain Celestial Group and Inventure Foods
CHICAGO, July 1, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the MannKind Corporation (Nasdaq:MNKD-Free Report), Kraft Foods Group, Inc. (Nasdaq:KRFT-Free Report), Mondelez International, Inc. (Nasdaq:MDLZ-Free Report), Hain Celestial Group Inc. (Nasdaq:HAIN-Free Report) and Inventure Foods, Inc. (Nasdaq:SNAK-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Monday's Analyst Blog:
MannKind's Afrezza Approval a Key Milestone
MannKind Corporation's (Nasdaq:MNKD-Free Report) long wait ended on a triumphant note when the FDA finally approved Afrezza for the improvement of glycemic control in adults suffering from diabetes mellitus. Afrezza becomes the first approved product at MannKind. The news comes as a huge relief for the company as the FDA had previously issued two complete response letters for the diabetes product.
The U.S. regulatory body has approved the drug for administration in diabetes patients before each meal or within 20 minutes after its commencement. However, the FDA said that Afrezza must be used in combination with long-acting insulin for treating patients suffering from type I diabetes.
Moreover, the drug was not recommended for the treatment of diabetic ketoacidosis and for patients who smoke. Afrezza also carries a boxed warning stating that there is a risk of acute bronchospasm in patients suffering from chronic lung disease.
Afrezza's approval also comes with a Risk Evaluation and Mitigation Strategy to confirm that the benefits of Afrezza overshadow the risks of acute bronchospasm in patients suffering from chronic lung disease. Moreover, the FDA has asked for several post-marketing studies for the drug.
As per the Centers for Disease Control and Prevention there are around 29.1 million people in the U.S. affected by diabetes mellitus.
MannKind has been flying high after it received a positive opinion from the FDA's Endocrinologic and Metabolic Drugs Advisory Committee on Apr 1 regarding the approval of Afrezza to improve glycemic control in adults with type I and type II diabetes. Shares have soared almost 149% since then. MannKind also touched a 52-week high of $11.11 on Jun 27.
Our Take
This is a milestone event for MannKind. Though delayed, but a much needed approval comes MannKind's way. The company will be receiving product revenues for the first time in the near future with the launch of Afrezza. Needless to say MannKind badly needed a regular source of revenues.
However, we remain concerned about the sales potential of the drug given so many limitations. In spite of the limitations, we still expect shares to rise on MannKind's first product approval.
MannKind, a biopharmaceutical company, presently carries a Zacks Rank #3 (Hold).
Will Kraft's Top Line Improve?
On Jun 27, we issued an updated research report on Kraft Foods Group, Inc. (Nasdaq:KRFT-Free Report).
On May 1, Kraft reported dismal first-quarter 2014 results, missing the Zacks Consensus Estimate for revenues and only managing to meet the same for earnings. Lower effective tax rate, strong productivity savings and pricing gains were offset by weak volumes and higher advertising/marketing costs in the quarter.
Though earnings increased from the year-ago quarter, net revenue and organic revenues declined 3.3% and 2.4%, respectively, as lower volume/mix offset better pricing. Shift in Easter timing, retailer inventory normalization and the recent cut in federal food assistance hurt volumes during the quarter.
In fact, Kraft's top line has been soft ever since the split from Mondelez International, Inc. (Nasdaq:MDLZ-Free Report) in Oct 2012 due to broader macro pressures. Several of its product categories have been sluggish due to consumption weakness and stiff competition.
In addition, rising food costs is a growing concern for the food companies. In 2014/2015, the overall cost environment for food commodities is expected to be under pressure due to domestic and worldwide agricultural supply and demand imbalance and other macroeconomic factors. In fact, the costs of cheese, meat and grains have risen sharply in the recent past. Costs of cheese, meat and coffee are expected to rise further in the coming quarters, thereby crippling margins.
Kraft has already raised or announced price increase for around 45% of its products to cover the rising costs. Further, in June, the company announced list price increases for its Maxwell House and Yuban roast and ground coffee brands in response to higher green coffee costs.
However, Kraft's strong brand portfolio, aggressive cost reduction and efficiency-improvement initiatives strengthen our faith in the stock. Management expects sales to pick up in the next quarter, gaining from the Easter shift. Moreover, Kraft will activate new ad campaigns across13 franchises in the second quarter. This, coupled with innovation in Oscar Mayer, Planters, and Philadelphia brands, should lend top-line support. Kraft's increased advertising investments, new product activity and improved quality of marketing could yield better results in future quarters.
However, the challenged U.S. food consumer environment and possible volume/market share erosion due to price increases may put pressure on the top line.
Kraft carries a Zacks Rank #3 (Hold). Better-ranked food stocks include Hain Celestial Group Inc. (Nasdaq:HAIN-Free Report) and Inventure Foods, Inc. (Nasdaq:SNAK-Free Report). Both the stocks have a Zacks Rank #2 (Buy).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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