Why Kraft Foods Gained Yesterday

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Kraft Foods Group climbed 2% yesterday after Morgan Stanley upgraded the food giant from equal weight to overweight.

So what: Along with the upgrade, analyst Matthew Grainger raised his price target to $60 (from $55), representing about 12% worth of upside to Friday's close. While momentum traders might be turned off by the stock's sluggish performance in 2013, Grainger believes Kraft's steadily improving fundamentals should fuel a market-topping return in 2014.

Now what: According to Morgan, Kraft's risk/reward trade-off looks rather attractive at this point. "Upgrading KRFT to Overweight following YTD underperformance of ~750 bps," noted Morgan. "We are raising our PT to $60 as we expect robust productivity and restructuring efforts to support above-peer EPS visibility and rational reinvestment in 2014, and result in rerating versus US Food peers." With Kraft shares still off nearly 10% from their 52-week highs and sporting a 4% dividend yield, it's tough to disagree with Morgan's upgrade.

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The article Why Kraft Foods Gained Yesterday originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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