Kellogg Company (K - Free Report) posted second-quarter 2021 results, wherein both earnings and sales beat the Zacks Consensus Estimate. While sales increased year over year, the bottom line declined due to tough comparisons with the year-ago period. Although management pulled up its organic sales growth guidance for 2021, expectations of supply-chain and cost headwinds caused it to reiterate the bottom-line view.
Kellogg has been focused on the health and safety of its workers, helping communities and ensuring food supply to the marketplace. The company’s second-quarter results reflect effectiveness of the Deploy for Growth strategy, as well as gains from Kellogg’s reshaped portfolio. Apart from this, the company continued to register a balance of sturdy top-line increase, consumption growth, profitability and cash flow generation on a two-year basis.
Quarter in Detail
Adjusted earnings of $1.14 per share tumbled 8.1% year over year, as the company lapped exceptional increase witnessed in the year-ago period. On a constant currency or cc basis, adjusted earnings per share declined 12.9% to $1.08. The bottom line, however, exceeded the Zacks Consensus Estimate of $1.03.
The company reported net sales of $3,555 million, which advanced nearly 3% year on year and surpassed the consensus mark of $3,418 million as well. Net sales were backed by favorable currency movements. Organic sales (excluding currency movements) remained flat year over year. The company lapped the year-ago period’s major rise in at-home demand in developed regions. This was compensated by away-from-home channel revival; better price/mix and solid momentum in emerging markets.
Adjusted operating profit dropped 12% to $497 million, while the same declined 15% to $478 million at cc. This was again a result of comparisons with the year-ago period, which was bolstered by unusually elevated operating leverage, as well as delayed brand investment.
Segment Discussion
Sales in the North America segment amounted to $2,013 million, which fell about 7% year over year, even after witnessing favorable currency impacts. Sales slid 8% on an organic basis due to tough comparisons with the year-ago period’s unusual growth. That said, a number of key brands retained their robust consumption growth momentum (on a two-year compound annual growth basis). Also, away-from-home channels continued witnessing revival from the year-ago period’s pandemic-induced downside.
Revenues in the Europe segment totaled $618 million, up roughly 13% year on year, courtesy of currency impacts and higher organic sales, which rose 3%. Organic sales were backed by strong snacks sales in Russia and Continental Europe.
Revenues in Latin America totaled $266 million, up 19% year on year, thanks to the positive currency movements and organic sales increase of 9%. Organic sales reflected broad-based improvement across the region and were steered by snacks sales.
Revenues in the Asia, the Middle East & Africa segment totaled $658 million, rising approximately 24% year over year, fueled by organic sales growth of 23% and slightly positive currency movements. The company saw broad-based increase in Asia, the Middle East, and Africa, with robust gains at Multipro.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $395 million, long-term debt of $7,029 million and total equity of $3,880 million. In the year-to-date period ended Jul 3, 2021, the company generated cash from operating activities of $687 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
Thanks to the recently-witnessed business momentum, organic sales growth in 2021 is now estimated to be flat to increase 1% year over year compared with the previously-guided view of nearly flat. The updated view still suggests a two-year compound annual increase of almost 3%.
Management expects industry-wide supply-chain headwinds as well as elevated cost inflation in the second half of 2021. Consequently, despite raising its organic sales guidance, management reiterated the operating profit, bottom-line and cash flow guidance.
Adjusted operating profit is still expected to decline roughly 1-2% at cc. This indicates a two-year compound annual increase of nearly 4%. Adjusted earnings per share are expected to grow 1-2% at cc, up from 1% growth anticipated earlier. This indicates a two-year compound annual increase of 5%.
Kellogg currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 9.4% in the past six months compared with the industry’s growth of 1.3%.
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Medifast (MED - Free Report) , 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.
Darling Ingredients (DAR - Free Report) carries a Zacks Rank #2 and its bottom line outpaced the Zacks Consensus Estimate by 29.8% in the preceding four quarters, on average.
J&J Snack Foods (JJSF - Free Report) has a Zacks Rank #2 and its bottom line has outperformed the consensus mark by a wide margin in the last four quarters, on average.
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Kellogg Company (K - Free Report) posted second-quarter 2021 results, wherein both earnings and sales beat the Zacks Consensus Estimate. While sales increased year over year, the bottom line declined due to tough comparisons with the year-ago period. Although management pulled up its organic sales growth guidance for 2021, expectations of supply-chain and cost headwinds caused it to reiterate the bottom-line view.
Kellogg has been focused on the health and safety of its workers, helping communities and ensuring food supply to the marketplace. The company’s second-quarter results reflect effectiveness of the Deploy for Growth strategy, as well as gains from Kellogg’s reshaped portfolio. Apart from this, the company continued to register a balance of sturdy top-line increase, consumption growth, profitability and cash flow generation on a two-year basis.
Quarter in Detail
Adjusted earnings of $1.14 per share tumbled 8.1% year over year, as the company lapped exceptional increase witnessed in the year-ago period. On a constant currency or cc basis, adjusted earnings per share declined 12.9% to $1.08. The bottom line, however, exceeded the Zacks Consensus Estimate of $1.03.
The company reported net sales of $3,555 million, which advanced nearly 3% year on year and surpassed the consensus mark of $3,418 million as well. Net sales were backed by favorable currency movements. Organic sales (excluding currency movements) remained flat year over year. The company lapped the year-ago period’s major rise in at-home demand in developed regions. This was compensated by away-from-home channel revival; better price/mix and solid momentum in emerging markets.
Adjusted operating profit dropped 12% to $497 million, while the same declined 15% to $478 million at cc. This was again a result of comparisons with the year-ago period, which was bolstered by unusually elevated operating leverage, as well as delayed brand investment.
Segment Discussion
Sales in the North America segment amounted to $2,013 million, which fell about 7% year over year, even after witnessing favorable currency impacts. Sales slid 8% on an organic basis due to tough comparisons with the year-ago period’s unusual growth. That said, a number of key brands retained their robust consumption growth momentum (on a two-year compound annual growth basis). Also, away-from-home channels continued witnessing revival from the year-ago period’s pandemic-induced downside.
Revenues in the Europe segment totaled $618 million, up roughly 13% year on year, courtesy of currency impacts and higher organic sales, which rose 3%. Organic sales were backed by strong snacks sales in Russia and Continental Europe.
Revenues in Latin America totaled $266 million, up 19% year on year, thanks to the positive currency movements and organic sales increase of 9%. Organic sales reflected broad-based improvement across the region and were steered by snacks sales.
Revenues in the Asia, the Middle East & Africa segment totaled $658 million, rising approximately 24% year over year, fueled by organic sales growth of 23% and slightly positive currency movements. The company saw broad-based increase in Asia, the Middle East, and Africa, with robust gains at Multipro.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $395 million, long-term debt of $7,029 million and total equity of $3,880 million. In the year-to-date period ended Jul 3, 2021, the company generated cash from operating activities of $687 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
Thanks to the recently-witnessed business momentum, organic sales growth in 2021 is now estimated to be flat to increase 1% year over year compared with the previously-guided view of nearly flat. The updated view still suggests a two-year compound annual increase of almost 3%.
Management expects industry-wide supply-chain headwinds as well as elevated cost inflation in the second half of 2021. Consequently, despite raising its organic sales guidance, management reiterated the operating profit, bottom-line and cash flow guidance.
Adjusted operating profit is still expected to decline roughly 1-2% at cc. This indicates a two-year compound annual increase of nearly 4%. Adjusted earnings per share are expected to grow 1-2% at cc, up from 1% growth anticipated earlier. This indicates a two-year compound annual increase of 5%.
Kellogg currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 9.4% in the past six months compared with the industry’s growth of 1.3%.
Looking for Solid Food Stocks? Check These
Medifast (MED - Free Report) , 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.
Darling Ingredients (DAR - Free Report) carries a Zacks Rank #2 and its bottom line outpaced the Zacks Consensus Estimate by 29.8% in the preceding four quarters, on average.
J&J Snack Foods (JJSF - Free Report) has a Zacks Rank #2 and its bottom line has outperformed the consensus mark by a wide margin in the last four quarters, on average.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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