Categories AlphaGraphs, Earnings, Retail

The Kellogg Co stock dips on weak outlook

The Kellogg Co (K) stock fell 5.5% in the premarket session after the breakfast-cereal giant posted drops in the sales across various US business segments for the third quarter. Earnings jumped 67% on the continued improvement in consumption, net sales performance, lower restructuring charges, and favorable mark-to-market impacts. The results exceeded analysts’ expectations.

Net income climbed by 67% to $380 million or $1.09 per share. The results were driven by the favorable mark-to-market adjustment and a one-time income tax adjustment for provisional estimates related to the adoption of Tax Reform. Lower tax rate drove non-GAAP EPS higher by 2.9% to $1.06.

Kellogg's third quarter 2018 Earnings Infographic
Kellogg Q3 2018 Earnings Infographics

The acquisition of protein bar RXBAR and the consolidation of Nigerian distributor Multipro drove sales up by 6.8% to $3.47 billion. On an organic basis, net sales inched up 0.4%, as underlying growth overshadowed the negative impact from the previously announced list-price adjustments and rationalization of stock-keeping units in US Snacks related to its transition from Direct-Store-Delivery (DSD).

Looking ahead into the full year 2018, Kellogg now expects net sales growth of about 5% on a currency-neutral basis, compared to the prior estimate range 4-5%, primarily reflecting improved net sales and consumption trends. However, adjusted EPS growth estimate is lowered to 7-8% on a currency-neutral basis from 11-13%, due to a reduction in adjusted operating profit outlook.

For the third quarter, sales from Kellogg North America rose 1.1% on the positive contribution from the acquisition of RXBAR. Kellogg Europe sales inched down 0.5% due to adverse currency translation.

The Kellogg Co posts wholesome quarterly profit jump

Kellogg Latin America sales rose 1.4% on sustained momentum in Mexico and strong growth in Mercosur, led by Parati biscuits in Brazil. Kellogg Asia Pacific sales grew 79% on consolidation of results of rapidly expanding Multipro and sustained organic growth across the region.

Sales from US Snacks fell 3.5% due to the list-price adjustment and rationalization of SKUs that were related to last summer’s transition out of its DSD distribution system. Sales from US Morning Foods dropped 1.3% as cereal consumption and share was impacted by the June recall of Honey Smacks, which masked improving performance elsewhere in the portfolio. US Specialty Channels sales declined 1.3% as it lapped year-earlier shipments related to hurricanes in the southeastern US.

Kellogg intends to continue to invest in their expansion, including increased costs near term, and the installation of in-house packing capacity to improve their margins over the medium term.

Shares of Kellogg opened lower on Wednesday and is trading down over 7%. The stock has risen over 13% in the past year while it has fallen over 1% in the year so far.


Follow our Google News edition to get the latest stock market, earnings and financial news at your fingertips.

Most Popular

Does Unity Software (U) stock has more room to run?

Last month, the IPO market was in a full swing. IPOs of Snowflake (NYSE: SNOW) and JFROG (NASDAQ: FROG) had an impressive opening day in September, the former creating a

PepsiCo (PEP): Steady snacking habits amid pandemic drive strong quarter for beverage giant

PepsiCo Inc. (NASDAQ: PEP) beat market expectations on both revenue and earnings for the third quarter of 2020. The company saw the momentum continue in its snacks business while the

Does the virus-driven boom make Electronic Arts (EA) a good investment?

With more and more people turning to virtual entertainment sources, amid the virus-related movement restrictions, video game publishers like Electronic Arts (NASDAQ: EA) are witnessing unusually high demand. Not surprisingly,

One thought on “The Kellogg Co stock dips on weak outlook

Comments are closed.


Add Comment
Viewing Highlight