Kellogg (K) Q1 Earnings & Sales Top Estimates, Guidance Raised

·5 min read

Kellogg Company K came out with robust first-quarter 2021 results, wherein both earnings and sales advanced year over year and came ahead of the respective Zacks Consensus Estimate. To top it, management raised its guidance for full-year 2021. Markedly, the strong quarterly performance reflected continued momentum across all major brands and categories, along with increased growth in emerging markets. Apart from these, the company’s solid revenue management and productivity efforts helped it tackle increasing cost inflation.

Kellogg has been focused on the health and safety of its workers, helping communities and ensuring food supply to the marketplace. The company has undertaken considerable investments in this regard. Its solid first-quarter performance even amid a tough environment reflects strength in its retail channel, which has been gaining from pandemic-led higher at-home consumption. However, it lagged the year-ago period’s major surge in demand. Retail business was fueled by strength in a number of major brands and robust e-commerce growth. While the away-from-home channel remained soft, the rate of decline moderated on a quarter-over-quarter basis during the first quarter.

Quarter in Detail

Adjusted earnings of $1.11 per share increased 12.1% year over year on the back of elevated net sales and operating leverage. On a constant currency or cc basis, adjusted earnings per share jumped 8.1% to $1.07. Also, the bottom line exceeded the Zacks Consensus Estimate of 95 cents.

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

The company reported net sales of $3,584 million, which advanced 5.1% year on year and surpassed the consensus mark of $3,401 million. Net sales were aided by burgeoning demand for packaged foods, stemming from increased at-home consumption amid the pandemic. Also, positive currency movements boosted sales. Together, these upsides helped the company battle continued weakness in the away-from-home channel as well as on-the-go occasions. Organic sales moved up 4%.

Adjusted operating profit rose 13.3% to $497 million, while the same rose 11.5% to $489 million at cc.

Segment Discussion

Sales in the North America segment amounted to $2,130 million, which grew 1.5% year over year, backed by favorable currency impacts. Sales grew 1% on an organic basis on the continued rise in packaged food demand due to increased at-home consumption. Adjusted operating profit increased 4% at cc.

Revenues in the Europe segment totaled $578 million, up 9.9% year on year, courtesy of currency impacts and higher organic sales, which rose 3%. The upside was driven by the continued increase in cereal sales, though it was lower than the year-ago period’s level that was boosted by the pandemic. Also, sales of Pringles remained sturdy. Adjusted operating profit grew 8% at cc.

Revenues in Latin America totaled $236 million, up 4.2% year on year, despite witnessing currency headwinds. Sales grew 10% on an organic basis owing to continued elevation in cereal demand along with accelerated snack sales (especially in Brazil due to Pringles). Adjusted operating profit surged 44% at cc.

Revenues in the Asia, the Middle East & Africa segment totaled $640 million, up 13.9% year over year, fueled by solid momentum in cereal, noodles, snacks and other categories. Organic sales grew 15%. Adjusted operating profit was up 25% at cc.

Other Financials

Kellogg ended the quarter with cash and cash equivalents of $391 million, long-term debt of $6,655 million and total equity of $3,655 million. In the year-to-date period ended Apr 3, 2021, the company generated cash from operating activities of $235 million.

Net cash provided by operating activities is likely to be $1.6-$1.7 billion in 2021, while cash flow is estimated to be $1.1-$1.2 billion.

2021 Guidance

Organic sales growth in 2021 is now estimated to be nearly flat year over year compared with the previously guided view of nearly a 1% decline. The updated view implies a two-year compound annual increase of almost 3%, up from nearly 2.5% expected earlier.

Adjusted operating profit is expected to decline roughly 1-2% at cc now compared with about a 2% decline expected earlier. This indicates a two-year compound annual increase of nearly 4% now compared with a 3-4% growth forecasted earlier.

Adjusted earnings per share are expected to grow 1-2% at cc now, up from 1% growth anticipated earlier. This indicates a two-year compound annual increase of 5% now compared with a 4-5% growth envisioned before.

Kellogg currently carries a Zacks Rank #4 (Sell). Shares of the company have gained 2.4% year to date compared with the industry’s growth of 9.1%.

Looking for Solid Food Stocks? Check These

Medifast MED, which currently carries a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 12.7%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Natural UNFI has a Zacks Rank #2 and its bottom line outpaced the Zacks Consensus Estimate by 13.6% in the trailing four quarters, on average.

B&G Foods BGS has a Zacks Rank #2 and a trailing four-quarter earnings surprise of 4.2%, on average.

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