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Kellogg Company (K - Analyst Report) is set to report its first-quarter fiscal 2013 results on May 2 before the market opens. Last quarter it posted 3.1% positive surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

During the first quarter, sales growth is expected to be solid. We believe the improving volume trends in North America and strong performance of its Pringles business will once again drive the top line in the quarter. Kellogg acquired The Procter & Gamble Company’s (PG - Analyst Report) snack unit in Jun 2012 which included the iconic potato snack brand, Pringles, for $2.7 billion. Pringles is now the second-largest brand at Kellogg.

However, the company expects adjusted operating profit to decline slightly year over year due to higher costs of input and other cost increases. Earnings per share are also expected to be down in the first quarter due to difficult year-ago comparisons (which included a $0.05 benefit from interest rate hedges) and headwinds from the Venezuela currency devaluation.

Earnings Whispers?

Our proven model does not conclusively show that Kellogg is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Negative Zacks ESP:  The Earnings ESP is -0.97%.  

Zacks #2 Rank (Buy):  Kellogg carries a Zacks Rank#2 (Buy). However the Zacks #2 Rank when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement.

Other Stocks to Consider

Here are some other food companies you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:

  • Flower Foods Inc. (FLO - Snapshot Report), with Earnings ESP of +14.63% and a Zacks Rank #1 (Strong Buy).
  • J&J Snack Foods Corp. (JJSF - Snapshot Report), with Earnings ESP of +9.84% and a Zacks Rank #2 (Buy)

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