Will Kellogg Start 1Q16 with Lower Revenue?

What Can Investors Expect from Kellogg's 1Q16 Results?

(Continued from Prior Part)

Revenue contributors

Kellogg Company (K) earns its revenue through the following geographical segments—North America, Europe, Latin America, and Asia-Pacific. The North America segment includes U.S. Morning Foods, U.S. Snacks, U.S. Specialty, and North America Other. The North America segment is the primary revenue segment for Kellogg. It generates around 60%–70% of its total revenue each quarter.

Revenue expectations for upcoming quarters

Analysts expect the revenue to be $3.46 billion for fiscal 1Q16. This represents a decline of 3% compared to revenue of $3.55 billion in 1Q15. The company missed estimates in the last two quarters in fiscal 2015. For 2H16, analysts expect the revenue to end the lower growth. For fiscal 2Q16, analysts expect the revenue to be slightly below the comparable quarter a year ago. For 3Q16 and 4Q16, the revenue is expected to be in line with the same quarter last year. It’s expected to grow by 1%, respectively. This is because the company enjoys stronger demand for its products in the second half of the year due to events and holidays. For fiscal 2016, analysts expect the revenue to be ~$13.39 billion—a slight fall of 1% compared to 2015.

What could impact revenue in 2016?

Management expects net sales to increase by 1%–3%. The company’s latest outlook includes more pricing to offset the effect of inflation on sales growth from Venezuela. The inflation rate can’t be predicted. However, Kellogg projects fiscal comparable net sales growth to exceed its guidance range due to the changes in Venezuela. Sales are expected to be in the original guidance range even after excluding the total impact of Venezuela. The currency translation could also have an impact since Kellogg operates internationally.

Revenue estimates for peers

Kellogg’s peers in the industry include General Mills (GIS), Lancaster Colony (LANC), and Mondelez International (MDLZ).

• General Mills’ revenue for its fiscal 4Q16 is expected to fall by 10%.

• Lancaster’s revenue for its fiscal 3Q16 is expected to rise by 6%.

• Mondelez’s revenue for its fiscal 2Q16 is projected to fall by 18%.

To gain exposure to Kellogg, you can invest in ETFs such as the PowerShares S&P 500 Low Volatility Portfolio (SPLV) and the iShares U.S. Consumer Goods ETF (IYK). They invest 1.2% and 0.86% of their portfolios in Kellogg.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - What Can Investors Expect from Kellogg’s 1Q16 Results?

• Part 3 - Will Kellogg’s Declining Earnings Growth Continue in 1Q16?

• Part 4 - Why Kellogg Didn’t Have a Good End to 2015