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Kellogg (K) Tops Q1 Earnings & Sales Estimates, Raises '23 View

Kellogg Company K delivered impressive first-quarter 2023 results, with the top and the bottom line beating the Zacks Consensus Estimate. Earnings was in line with the year-ago quarter’s level, while net sales increased year over year. Net sales growth was backed by revenue growth management actions, momentum in snacks and continued recovery in the North America cereal business. Courtesy of solid start to the year, management raised its 2023 sales and profit view.

Quarter in Detail

Kellogg reported adjusted earnings of $1.10 per share, which came ahead of the Zacks Consensus Estimate and our estimate of $1.00. The bottom line came in line with the year-ago quarter’s figure. On a constant currency or cc basis, adjusted earnings per share (EPS) increased 2.7% to $1.13 a share.

The company recorded net sales of $4,053 million, beating the Zacks Consensus Estimate of $3,959.5 million and our estimate of $3,805.9 million. The top line advanced 10.4% year over year.

Net sales growth was back by favorable price/mix, continued momentum in snacks and noodles and recovery in North America cereal. These factors more than offset the impacts of price elasticity and unfavorable currency rates among other reasons. Organic net sales (excluding the currency impact) increased 14%.

Kellogg Company Price, Consensus and EPS Surprise

 

Kellogg Company Price, Consensus and EPS Surprise
Kellogg Company Price, Consensus and EPS Surprise

Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote

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Adjusted operating profit increased 15%, while the same rose 18% at cc.

Segment Discussion

Sales in the North American segment amounted to $2,388 million, increasing 13.2% year over year. The upside in sales can be attributed to inflation-driven price realization and sustained momentum in snacks, among other reasons. Net sales increased 13.7% on an organic basis.

Revenues in the European segment totaled $604 million, up 2.5% year over year on favorable price/mix and momentum in snacks. These factors more than offset the impacts of suspended shipments into Russia and unfavorable currency rates, among others.  Organic net sales increased 7.6%.

Revenues in Latin America totaled $292 million, up 14.2% year over year, backed by a solid price/mix, momentum in snacks and cereal and favorable foreign currency rates. Organic sales ascended 11.3%.

Revenues in the Asia Pacific and the Middle East & Africa segment totaled $770 million, rising 7.2% year over year. The increase was driven by a favorable price/mix, among other reasons. Unfavorable foreign currency rates were a concern. Organic sales increased 19.8%.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Other Financials

Kellogg ended the reported quarter with cash and cash equivalents of $347 million, long-term debt of $5,759 million and total equity of $4,479 million. The company generated cash from operating activities of $276 million for year-to-date period ended Apr 1, 2023.

Net cash provided by operating activities is likely to be $1.7-$1.8 billion in 2023, while cash flow is estimated to be $1.0-$1.1 billion.

2023 Guidance

Management expects organic net sales growth to be up 6-7% compared with the earlier guidance of 5-7% growth. The revised outlook reflects solid first-quarter results, price/mix growth and sustained momentum in snacks and emerging markets.

The adjusted operating profit is now expected to rise 8-10% at cc, up from its earlier guidance of 7-9% growth at cc. The outlook reflects increased net sales growth and efforts toward profit-margin recovery. Management expects the adjusted EPS to decline 1-3% at cc. The company had earlier expected the metric to decline 2-4% at cc.

Shares of this Zacks Rank #3 (Hold) company has gained 3.7% in the past three months compared with the industry’s 5.9% growth.

Solid Consumer Staple Picks

Some better-ranked consumer staple stocks are Lamb Weston LW, General Mills GIS and Conagra Brands CAG.

Lamb Weston, which operates as a frozen potato product company, currently sports a Zacks Rank #1 (Strong Buy). LW has a trailing four-quarter earnings surprise of 47.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year sales and earnings suggests increases of 29.6% and 116.8%, respectively, from the year-ago reported number.

General Mills, a branded consumer food company, currently carries a Zacks Rank #2 (Buy). GIS has a trailing four-quarter earnings surprise of 8.1%, on average.

The Zacks Consensus Estimate for General Mills’ current fiscal-year sales and earnings suggests growth of 6.3% and 7.4%, respectively, from the year-ago reported figures.

Conagra Brands, operating as a consumer-packaged goods food company, currently carries a Zacks Rank #2. CAG has a trailing four-quarter earnings surprise of 13.2%, on average.

The Zacks Consensus Estimate for Conagra Brands’ current fiscal-year sales and earnings suggests improvements of 7.1% and 16.5%, respectively, from the year-ago reported number.

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Lamb Weston (LW) : Free Stock Analysis Report

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