The proposed split would create a $35 billion snack food company with brands like Oreo, Cadbury, Tang, and Trident, and a $14 billion grocery business that would continue to supply grocers with Maxwell House coffee, Jell-O, and Philadelphia-brand cream cheese.

One investor who is not excited by the news is Warren Buffett, who recently reduced his holdings of Kraft shares from 87 million to 78 million. Buffett never liked the deal Kraft made for Cadbury and has been lightening his holdings of the food giant ever since.

Paul Ausick

The question now, of course, is whether Kraft Foods Inc. (NYSE: KFT), maker of Maxwell House and Gevalia brands among others, Starbucks Corp. (NASDAQ: SBUX), Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR), Peet’s Coffee & Tea Inc. (NASDAQ: PEET), and Coffee Holding Co. Inc. (NASDAQ: JVA) will follow suit. Kraft would seem like a good bet to lower prices to compete in the retail space, but the premium coffee roasters are more likely to leave prices where they are as long as they can in order to make a little extra margin.

Last week’s price for arabica beans was about $1.90/pound. A year ago the price was just over $3.00/pound. Robusta (cheaper) beans currently cost about $1.14/pound, about 10% below the five-year high of $1.26/pound set last June.

A continued decline in arabica prices may force the premium roasters to lower prices because the story will hit the headlines and consumers will start making some noise about being gouged by the coffee companies. But that day is a ways off yet. But imagine, both gasoline and coffee prices falling at the same time. What an idea!

Paul Ausick

Today’s share price reaction to the earnings news is enough that you might wonder if those old buyout rumors might be surfacing again.  The question is whether or not The Coca-Cola Company (NYSE: KO) or another outfit wants to pay more than $12 billion for an acquisition.

Earnings came in up 38% to $0.41 EPS and revenues came to $454.6 million.  We had estimates of $0.38 EPS and $447.1 million in revenues.  There was also an impressive operating margin gain which grew to 27.8% from 24.8% as growth in Asia is paying off.    Shares closed at $65.31 on Wednesday and the pre-market action has shares up 12% at $73.20.  The market cap at yesterday’s close was $11.4 billion and the 52-week trading range is $32.35 to $83.96.

From an outsider’s view, Monster looks like a beverage company where the time to acquire it may have come and gone.  Monster trades at well over 30-times expected 2012 earnings against about 18-times earnings for Coca-Cola and about 16-times expected earnings for Pepsico, Inc. (NYSE: PEP).  Coca-Cola has finally come back in favor for defensive investors, and Pepsico is in a state of flux where many feel it has lost its way.  It seems like for now these two beverage giants would not be wanting to spend well over $12 billion to buy an energy drink outfit, but in the end everything may just boil down to price.

JON C. OGG

Chairman and founder Robert Stiller is out.  Green Mountain has appointed Michael J. Mardy, a director and chair of the Company’s Audit and Finance Committee, as interim Chairman of the Board.  Ms. Hinda S. Miller, who is chair of the Company’s Corporate Social Responsibility Committee, has been appointed as Chair of the Governance and Nominating Committee.

Robert Stiller sold 5 million shares to meet a margin call and the Form 4 filing noted, “The sales of Common Stock were effected by a financial institution pursuant to a margin call because the reporting person’s account did not satisfy the minimum margin requirements under various margin loans. The total number of shares reported as sold on this Form 4 is 5,000,000.”  The problem here is that Stiller is the founder and chairman of Green Mountain.

The full release has all of the details but this is something that may be far from over.  Both members who are being booted will remain on the board but will not receive their normal compensation until the company’s review of the situation is over.

Green Mountain shares are down only 1.6% at $25.95 in pre-market trading and the 52-week range is $24.03 to $115.98.

JON C. OGG

Agrium attributed its increased sales to higher volumes and higher prices for nitrogen. Last week, CF Industries Holdings Inc. (NYSE: CF) also blasted through estimates, but the company’s best seller was also its nitrogen products. Potash Corp. of Saskatchewan Inc. (NYSE: POT) missed earnings estimates on lower potash sales and margins (gross margins fell -56% year-over-year). The Mosaic Co. (NYSE: MOS) also missed on earnings as potash volumes fell and phosphate costs rose. Monsanto Co. (NYSE: MON) pounded EPS estimates, but analysts believe that sales were all pulled forward due to the warm weather.

Agrium and CF are less dependent on potash and phosphates than are the others, and the rise in nitrogen is directly related to its ability to boost yields on the same amount of acreage. Potash fertilizer is needed to ensure healthy plants, but its contribution yields is less important.

Whether demand for nitrogen will continue through the Northern Hemisphere’s growing season remains to be seen, but as more people demand more food on the same amount of acreage, sales and margins on nitrogen are likely to keep pace.

The catch in Agrium’s results is that the company’s first half adjusted EPS guidance is a relatively weak $5.50-$6.10. Analysts had been expecting $5.67 before today’s blowout number. Investors are likely to interpret the lowish guidance as an indication that Agrium’s sales were also pulled forward into the first quarter.

Shares of Agrium are trading up about 0.13% at $84.68 in a 52-week range of $60.15-$93.49.

Paul Ausick

After the weakness in the broad market has the DJIA down 140 points (or -1.1%) and the S&P 500 Index down 15 points or 1.1%, it turns out that most of the defensive stock sector leaders are holding up far better than the broad market in our go-to defensive stock portfolio.  We have taken a look at each of these with share price snapshots right before Noon EST.

No matter what, you gotta drink!  Pepsico, Inc. (NYSE: PEP) is down 0.5% at $66.28 against a 52-week high of $71.89; Coca-Cola Company (NYSE: KO) is down 0.4% at $76.97 against a 52-week high of $77.82.  With yields of about 3% on average, these are now challenging the 30-Year Treasury yields.  The beer segment is not acting defensive as it should, perhaps because they are foreign issues now with more currency risks: Anheuser-Busch InBev SA (NYSE: BUD) and Molson Coors Brewing Company (NYSE: TAP) are not acting very defensive with price corrections of 3% and 2$ respectively.

Perhaps the most defensive you can get is water, and the top water utility is American Water Works Company, Inc. (NYSE: AWK) with a premium valuation.  This water leader is down 0.8% at $33.73 against a 52-week and all-time high of $34.89.

Food is supposed to be defensive, although a drop of 1.5% in McDonald’s Corporation (NYSE: MCD) to $94.10 is causing some added stress in what was the darling of the DJIA in 2011.  The rest of the defensive food segment seems to be less damaged when you evaluate the moves: Kraft Foods Inc. (NYSE: KFT) is down only 0.4% at $39.11; ConAgra Foods, Inc. (NYSE: CAG) is down 0.7% at $25.52; Campbell Soup Co. (NYSE: CPB) is down only 0.3% at $33.97; and Hormel Foods Corporation (NYSE: HRL) is down only 1 penny at $28.92 as the world is getting excited about Spam again.

Smoking is defensive again and the tobacco stocks are holding up much better than the broad market with those 5% and higher dividends: Altria Group Inc. (NYSE: MO) is down only $0.3% at $32.10 against a 52-week high of $32.62; Vector Group Ltd. (NYSE: VGR) is down only 0.2% at $16.88; and Reynolds American Inc. (NYSE: RAI) is down only 0.2% at $40.18 against a high of $42.81.

Shaving, diapers, toilet paper, and other consumer products are acting defensive with some gains on a weak day.  Procter & Gamble Co. (NYSE: PG) is trading up $0.11 at $64.36 and Kimberly-Clark Corporation (NYSE: KMB) is up $0.08 at $79.08 with KMB challenging the 52-week high.  Colgate-Palmolive Co. (NYSE: CL) is down ‘only’ 0.5% at $99.10 against a 52-week high of $100.81.

Drug and medical is holding up on the consumer end with losses look far less than the broader market: Merck & Co. Inc. (NYSE: MRK) is down 0.35% at $38.40; Pfizer Inc. (NYSE: PFE) is down 0.3% at $22.38; and Johnson & Johnson (NYSE: JNJ) is down the least with a drop of 0.2% at $64.65 against a 52-week high of $68.05.

Those smartphones and telephones are somewhat defensive, and those 5%-plus yields sure shield investors who are worried about chasing the hottest growth stocks.  Verizon Communications Inc. (NYSE: VZ) is down only 1-penny at $40.52 with a 5% dividend yield and AT&T, Inc. (NYSE: T) is actually up 0.2% at $33.08 with a yield of about 5.4%.

When investors want safety and when the Treasury yield is so low on the longer-term Treasury market, many investors turn to the safety of the higher dividends and safer stocks that are defensive.  Greece and the rest of PIIGS may fall again, but the logic is that U.S. consumers still have to eat, drink, shave, put on deodorant, and tend to stick with their core vices as best as they can.

JON C. OGG

Competitors McDonald’s Corp. (NYSE: MCD), Yum! Brands Inc. (NYSE: YUM), and Chipotle Mexican Grill Inc. (NYSE: CMG) have already reported quarterly results, with Yum and Chipotle Mexican Grill raising their outlooks rather than lowering them. Jack in the Box Inc. (NASDAQ: JACK), which reports later this month, is expected to post higher profit on slightly lower sales.

Wendy’s saw its margins drop from 13.4% a year ago to 11.8% this year, “due primarily to the impact from higher commodity costs — especially for fresh beef — and the impact from unfavorable product mix.” Commodity costs are what they are, and every restaurant faces the same issue, but having the wrong products is a management issue.

The company plans to fix that by remodeling its stores:

We are allocating substantial resources toward restaurant development, marketing, product innovation and customer service initiatives that we believe will ultimately accelerate sales growth, enhance the quality of our store base and grow our worldwide presence over time.

The key word there is “ultimately.” Will investors give the company the time it will need to make all those changes? And will the changes actually deliver on the promises?

The company closed a net 13 stores in the first quarter, bringing its worldwide total of locations to 6,581, only 354 of which are outside North America. Wendy’s also said that it “continues to target more than 8,000 locations outside North America.” The question is whether or not the company waited too long to look for growth overseas.

In the pre-market this morning, Wendy’s shares are down about -2.5% at $4.75 in a 52-week range of $4.29-$5.62.

Paul Ausick

Green Mountain’s partner in some products and competitor in others, Starbucks Corp. (NASDAQ: SBUX), isn’t getting beaten up too badly because its deal with Green Mountain isn’t critical to the Seattle-based giant. One stock that is getting beaten up is Coffee Holding Co. Inc. (NASDAQ: JVA), down about -12%. Coffee Holding Co. is one of Green Mountain’s main suppliers, not a good thing to be today.

Among the many issues Green Mountain listed in its earnings report last night was higher coffee prices. That seems a little disingenuous. Coffee prices today are hovering around $1.75/pound for Arabica, down from more than $3/pound just a year ago. Green Mountain must have bought a mountain of the stuff and saved it until now in order to be blaming coffee prices, which have been falling almost non-stop since a September peak at around $2.90/pound.

Green Mountain’s trading volume today tops 73 million shares, more than 13x average daily volume. Shares are down -49.4% at $25.08 after posting a new 52-week low of $24.40. The prior range was $39.42-$115.98. Coffee Holding Co. shares are down about -12.6% at $7.67 in a 52-week range of $5.63-$30.98. Volume is only slightly higher than normal.

Paul Ausick

The answers were lame and lamer and even the company’s announcement that it would re-purchase about $428 million of outstanding stock didn’t stop the slide. Another company with a similar business model, Nu Skin Enterprises Inc. (NYSE: NUS), is also taking a hit today. Nu Skin announced its own $250 million stock buyback yesterday.

The aim of Einhorn’s questions was to get Herbalife to indicate whether or not distributors were selling the products or just letting them stack up in the warehouse or garage. If they’re just stacking up, at some point the distributor will have to stop buying and that won’t be good for Herbalife.

Surely company executives must or should have this information. Without it they’re steering the ship blindfolded and it didn’t take investors long to reach a conclusion.

Herbalife shares are down about -9.5% today, at $47.68 after posting a new 52-week low of $46.50 earlier. The prior 52-week range was $47.50-$73.00. Nu Skin shares are down about -4.3% at $45.97 in a 52-week range of $33.52-$62.02.

Paul Ausick

The company said that its own surveys generate estimates that its U.S. Keurig Single Cup Brewer installed base has increased to between 10.8 and 12.2 million brewers in use in households as of March 2012.  Cash and cash equivalents rose to $146.0 million at March 24, 2012 from $33.7 million at March 26, 2011.

Total net sales for 2012 are expected to be 45% to 50% higher than 2011 to $3.8 billion to $4.0 billion; earnings are now put at $2.40 to $2.50 per share versus estimates of $2.67 EPS and $4.27 billion in sales.

Shares closed down 0.4% at $49.52 today, but the after-hours reaction is down an awful 37% at $31.13 in active trading after its stock reopened from a trading halt.  The prior 52-week trading range was $39.42 to $115.98.

Frankly, some of these figures look so bad that it required double-checking just to make sure that the estimates and comparable earnings reports were on the right company.

Herb Greenberg on CNBC has been pointing out the caution and controversy in this company for months and months.  Today’s news is not going to cause Greenberg and other skeptics from deciding to warm up to the name.

The numbers are bad enough here that it may make some wonder about the partnership with Starbucks Corporation (NASDAQ: SBUX), for better or worse and for right or wrong.  Starbucks closed up 0.4% at $57.92 and shares are indicated slightly lower (less than 1%) in light after-hours trading volume.

JON C. OGG