Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC) Downgrade Chipotle (NYSE:CMG) on Rising Food Prices, Goldman (NYSE:GS) Still Likes Them

Bank of America (NYSE:BAC) and Wells Fargo (NYSE:WFC) were among four companies downgrading Chipotle Mexican Grill (NYSE:CMG), as food companies like Kellogg (NYSE:K) and Kraft (NYSE:KFT) are warning of the need to raise prices because of increasing food costs.

Miller Tabak and Morgan Keegan also downgraded Chipotle, but Goldman Sachs is going against the grain, maintaining "Buy" rating on the restaurant chain.

Goldman noted that Chipotle's sales growth will be able to overcome the higher costs of food.

They Chipotle is "the best growth story within our coverage universe and believe the company is still very early in its long-term growth trajectory."

Goldman raised their price target on Chipotle from $285 to $310.

Kraft (NYSE:KFT) to Raise Prices as Margins Squeezed

All things considered, Kraft Foods (NYSE:KFT) performed well in the last quarter, managing to meet expectations in a challenging scenario.

The company was able to generate earnings of $540 million, or 31 cents a share. While down 24 percent from last year in the same quarter, that was largely from the costs related to integrating Cadbury.

Minus costs, Kraft earned 46 cents a share, a penny off the 47 cents a share generated last year. That was the exact number analysts had been looking for.

Revenue jumped to $13.77 billion, a gain of 30 percent. Analysts had expected revenue to come in at $13.48 billion.

While Kraft cut boosted prices in the fourth quarter, they won't be enough to sustain profitability, said the food company, and they said more price hikes will be added throughout 2011.

All of that comes from commodity prices rising for corn, wheat, cocoa and sugar, among others.

Consequently, Kraft had to lower its EPS estimate for the year to 11 percent to 13 percent. In November they had estimated growth would be in the mid-teens.

Increases in prices won't help the company in the short-term, as it'll be several months before they start making a difference, so the latter part of 2011 will have margins return to wider levels.

Competitors Kellog Company (NYSE:K) and Sara Lee (NYSE:SLE) also recently announced they're going to be raising prices as well.

Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL), Hershey's (NYSE:HSY), Kellogg (NYSE:K) Facing Shrinking Margins on Higher Commodity Prices

While companies producing most commodities will be sure to benefit from higher prices (for the most part) going forward, others like Procter & Gamble (NYSE:PG), Colgate-Palmolive (NYSE:CL), Hershey's (NYSE:HSY) and Kellogg (NYSE:K), will continue to have their margins pressured, as the weak economy will probably force them to eat the higher prices rather than pass them on to consumers.

All the above-mentioned companies have confirmed margins are under pressure, and some have already lowered their earnings guidance for 2011, such as Hershey's recently did because of rising sugar and cocoa prices.

Kellog on the other hand, has said they're going to increase prices in response to the higher input costs, but it will be done selectively.

Analysts are conflicted on the issue, as some say the increase in input costs haven't hurt the companies yet, but the fact that the major companies named above have all said their margins are under pressure somewhat undermines that argument.

Others think the rising costs aren't being taken seriously enough, and if more workers are higher, inputs will go beyond simply rising commodity prices, to overall input costs rising, putting even more pressure on margins and earnings.

But at this time it's the rising commodity prices that are the real threat, and in that regard, some analysts feel they're being underestimated as to the effects they'll have on companies, and either they'll have to raise prices in a weak economy or eat them. Either way it won't help their performance.

Kellog closed Friday at $53.42, gaining $0.90, or 1.71 percent. Hershey closed level at $50.49. Colgate-Palmolive ended the session at $76.24, up $0.31, or 0.41 percent. Procter & Gamble closed at $63.61, gaining $0.71, or 1.13 percent.

Goldman (NYSE:GS) Shrinks Estimates on Coca-Cola (NYSE:KO), Philip Morris (NYSE:PM), Sara Lee (NYSE:SLE) and Coca-Cola Enterprises (NYSE:CCE) on Forex

Citing the strengthening of the U.S. dollar in the midst of the sovereign debt crisis in Europe, Goldman Sachs (NYSE:GS) has lowered their estimates on a number of food, beverage and tobacco stocks, with Goldman saying Coca-Cola (NYSE:KO), Philip Morris International, Inc. (NYSE:PM), Sara Lee Corp. (NYSE:SLE) and Coca-Cola Enterprises Inc. (NYSE:CCE) expected to have the most negative impact on them.

For the broader food, beverage, & tobacco sector, Goldman lowered the estimates by a range of 1 to 2 percent. For the companies named above, they're estimates were lowered by a range of 2 to 3 percent.

Below are the changed EPS estimates of Goldman for the companies in the sector:

Coca-Cola: reiterated FY10 EPS at $3.50, full year 2011 lowered from $3.90 to $3.83.

Coca-Cola Enterprises: kept full year 2010 EPS at $3.50, full year 2011 lowered from $2.04 to $1.99.

Kellogg Company (NYSE:K): maintained full year 2010 EPS at $3.29, full year 2011 lowered from $3.50 to $3.48

Campbell Soup (NYSE:CPB): cut full year 2011 EPS estimates from $2.50 to $2.48 and full year 2012 from $2.68 to $2.65.

Kraft Foods Inc. (NYSE:KFT): maintained full year 2010 EPS at $3.29, full year 2011 dropped from $2.28 to $2.25.

PepsiCo, Inc. (NYSE:PEP): maintained full year 2010 EPS at $4.12, full year 2011 lowered from $4.65 to $4.63.

Philip Morris International Inc.: full year 2010 lowered from $3.89 to $3.85, full year 2011 lowered from $4.62 to $4.45.

Sara Lee Corp.: full year 2011 EPS lowered form $0.86 to $0.84, full year 2012 lowered from $0.95 to $0.91.

Fortune Brands (NYSE:FO): reiterated full year 2010 EPS at $2.77, full year 2011 lowered from $3.68 to $3.66

Coca-Cola was trading at $64.64, gaining $1.47, or 2.32 percent at 1:16 PM EST. Coca-Cola Enterprises was at $24.65, increasing by $0.50, or 2.07 percent. Philip Morris International, Inc. was at $57.62, rising by $0.73, or 1.28 percent, Sara Lee Corp. was up to $15.29, increasing $0.29, or 1.93 percent. Kellog rose to $49.42, gaining $0.19, or 0.39 percent. Campbell Soup increased to $34.15, rising by $0.25, or 0.74 percent. Kraft pushed to $30.65, rising $0.40, or 1.32 percent. Pepsico pressed to $65.36, gaining $1.21, or 1.89 percent. Fortune Brands rose to $60.54, increasing by $1.45, or 2.45 percent.

Interesting that all the stocks mentioned by Goldman were up today in spite of the Forex concerns.