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WK Kellogg (KLG) Q3 Earnings Top Estimates, Sales Down Y/Y
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WK Kellogg Co. (KLG - Free Report) , which became an independent, publicly traded company on Oct 2, 2023, reported third-quarter 2023 results. The leading branded ready-to-eat cereal provider’s top and bottom line surpassed the Zacks Consensus estimate. Earnings increased year over year while net sales declined.
Q3 in Detail
WK Kellogg’s earnings were 49 cents per share, indicating growth from 27 cents reported in the year-ago quarter. The metric surpassed the Zacks Consensus Estimate of 25 cents.
The company recorded net sales of $692 million, surpassing the Zacks Consensus Estimate of $659 million. However, the top line declined 2% year over year due to price elasticities.
Volume fell 13% due to unfavorable price elasticity. Price/mix increased nearly 12% on the back of revenue growth management initiatives undertaken to mitigate input-cost inflation.
Adjusted gross profit was $193 million, up from $178 million reported earlier. Adjusted gross margin expanded to 27.9% from 25% in the prior year’s quarter.
Image Source: Zacks Investment Research
WK Kellogg ‘s standalone adjusted EBITDA came in at $51 million, up 65% year over year. The upside can be attributed to improved productivity and gains from revenue growth management initiatives. Operating profit improved to $17 million from $7 million reported in the prior year quarter.
Selling, general and administrative expense was $179 million, up 7.2% from $167 million reported in the year-ago quarter. As a percentage of sales, the metric came in at 26%, up from 24% in the year-ago quarter. The rise in such costs can be attributed to incremental separation and restructuring expenses.
Other Financial Updates
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $64 million, long-term debt of $487 million and total equity of $196 million. KLG generated cash from operating activities of $184 million for the year-to-date ended Sep 30, 2023.
Guidance
WK Kellogg expects 2023 adjusted net sales of $2,720-$2,740 million. Interest expenses are likely to be in the band of $10-$12 million for the year. Management anticipates depreciation and amortization expenses of $68-$72 million. Adjusted EBITDA is expected to be in the range of $248-$252 million. Standalone adjusted EBITDA margin is likely to be between 9.1% and 9.2% in 2023.
For 2024, the company anticipates adjusted net sales growth to be flat year over year. Interest expenses are likely to be in the $45-$55 million range during 2024, while depreciation and amortization expenses are likely to be between $80 million and $90 million. Adjusted EBITDA is likely to be in the $255- $265 million range in 2024.
KLG’s stock has dropped 0.7% in the past month against the industry’s 1.6% growth.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) , a packaged bakery food products company, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 7.6% on average.
The Zacks Consensus Estimate for Flowers Foods’ current fiscal-year sales suggests growth of 6.7% from the corresponding year-ago reported figure.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 1.2% from the corresponding year-ago reported figure.
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WK Kellogg (KLG) Q3 Earnings Top Estimates, Sales Down Y/Y
WK Kellogg Co. (KLG - Free Report) , which became an independent, publicly traded company on Oct 2, 2023, reported third-quarter 2023 results. The leading branded ready-to-eat cereal provider’s top and bottom line surpassed the Zacks Consensus estimate. Earnings increased year over year while net sales declined.
Q3 in Detail
WK Kellogg’s earnings were 49 cents per share, indicating growth from 27 cents reported in the year-ago quarter. The metric surpassed the Zacks Consensus Estimate of 25 cents.
The company recorded net sales of $692 million, surpassing the Zacks Consensus Estimate of $659 million. However, the top line declined 2% year over year due to price elasticities.
Volume fell 13% due to unfavorable price elasticity. Price/mix increased nearly 12% on the back of revenue growth management initiatives undertaken to mitigate input-cost inflation.
Adjusted gross profit was $193 million, up from $178 million reported earlier. Adjusted gross margin expanded to 27.9% from 25% in the prior year’s quarter.
Image Source: Zacks Investment Research
WK Kellogg ‘s standalone adjusted EBITDA came in at $51 million, up 65% year over year. The upside can be attributed to improved productivity and gains from revenue growth management initiatives. Operating profit improved to $17 million from $7 million reported in the prior year quarter.
Selling, general and administrative expense was $179 million, up 7.2% from $167 million reported in the year-ago quarter. As a percentage of sales, the metric came in at 26%, up from 24% in the year-ago quarter. The rise in such costs can be attributed to incremental separation and restructuring expenses.
Other Financial Updates
The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $64 million, long-term debt of $487 million and total equity of $196 million. KLG generated cash from operating activities of $184 million for the year-to-date ended Sep 30, 2023.
Guidance
WK Kellogg expects 2023 adjusted net sales of $2,720-$2,740 million. Interest expenses are likely to be in the band of $10-$12 million for the year. Management anticipates depreciation and amortization expenses of $68-$72 million. Adjusted EBITDA is expected to be in the range of $248-$252 million. Standalone adjusted EBITDA margin is likely to be between 9.1% and 9.2% in 2023.
For 2024, the company anticipates adjusted net sales growth to be flat year over year. Interest expenses are likely to be in the $45-$55 million range during 2024, while depreciation and amortization expenses are likely to be between $80 million and $90 million. Adjusted EBITDA is likely to be in the $255- $265 million range in 2024.
KLG’s stock has dropped 0.7% in the past month against the industry’s 1.6% growth.
3 Appetizing Picks
Lamb Weston (LW - Free Report) , which offers frozen potato products, currently sports a Zacks Rank #1 (Strong Buy). LW delivered an earnings surprise of 46.2% in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
Flowers Foods (FLO - Free Report) , a packaged bakery food products company, currently carries a Zacks Rank #2 (Buy). FLO has a trailing four-quarter earnings surprise of 7.6% on average.
The Zacks Consensus Estimate for Flowers Foods’ current fiscal-year sales suggests growth of 6.7% from the corresponding year-ago reported figure.
The Kraft Heinz Company (KHC - Free Report) , a food and beverage product company, currently carries a Zacks Rank #2. KHC has a trailing four-quarter earnings surprise of 9.9% on average.
The Zacks Consensus Estimate for Kraft Heinz’s current fiscal year sales suggests growth of 1.2% from the corresponding year-ago reported figure.