Shares Of Kraft Lower Despite Upgrade At Canaccord

Shares of Kraft Foods Group Inc (NASDAQ: KRFT) were trading lower by 1 percent on Monday despite shares being upgraded at Canaccord Genuity.

In a report published Friday, Canaccord Genuity analyst Alicia Forry upgraded Kraft Foods to Buy from Hold with a price target boosted to $96 from a previous $70.

"The announcement that 3G and Berkshire Hathaway will take control of Kraft Foods Group is a welcome surprise for Kraft shareholders, as it clarifies the strategic direction of the business and introduces both revenue and cost synergies, as well as highly regarded management," Forry wrote. "Our knowledge of 3G's management style leads us to have great confidence in the stated $1.5 billion cost synergies."

Forry said that Anheuser Busch Inbev SA (NYSE: BUD) – another 3G controlled company - has consistently exceeded its synergy targets. The analyst noted that there are several parallels between Kraft Heinz and Anheuser Busch based on the management philosophy of 3G's founders who will now be running the company. As such, the acquisition will be 7 percent accretive to base Kraft earnings in 2017.

Bottom line, the synergies at Kraft Heinz will be transparent to the market and could result in further consolidation in the industry.