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Kellogg's (K) Q1 Earnings Top Estimates, Organic Sales View Up
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Kellogg Company (K - Free Report) delivered robust first-quarter 2022 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate while the former grew year over year. The robust performance was backed by strength in snacks brands across all four regions, as well as favorable price mix stemming from the company’s revenue growth management. These helped the company amid a tough business landscape, with economy-wide shortages and elevated cost inflation that was aggravated by the Ukraine war.
The company is progressing well toward reviving sales and inventory in its North America cereal business, which was hurt by the fire and labor strike at its manufacturing network in the second half of 2021. Management raised its organic net sales guidance while keeping other forecasts unchanged.
Quarter in Detail
Adjusted earnings of $1.10 per share declined 0.9% year over year. On a constant currency or cc basis, adjusted earnings per share dipped 0.9% to $1.12. Nevertheless, the bottom line exceeded the Zacks Consensus Estimate of 91 cents.
The company reported net sales of $3,672 million, which advanced 2.4% year on year and surpassed the consensus mark of $3,582 million. Net sales growth was backed by favorable price/mix, strength in international regions and growth in snacks brands across all four regions. This was partially countered by currency headwinds, and inadequate finished goods inventory in North America cereal stemming from the aforementioned fire outbreak and labor strike in the second half of 2021. Organic net sales increased 4.2%.
Adjusted operating profit fell 4.3% to $476 million, while the same declined 2.4% to $485 million at cc.
Segment Discussion
Sales in the North America segment amounted to $2,109 million, declining 0.9% year over year. The downside was caused by soft volumes due to lapping robust two-year comparisons, as well as supply hurdles mainly related to cereal inventory, resulting from the abovementioned fire and labor strike. This was partly made up by strong snacks brands performance and favorable price/mix stemming from the company’s revenue growth management. Net sales dipped less than 1% on an organic basis.
Revenues in the Europe segment totaled $589 million, up 1.9% year on year, with positive price/mix more than compensating for adverse impacts from lapping solid two-year comparisons and major currency headwinds. Organic net sales jumped 8% thanks to strength in snacks.
Revenues in Latin America totaled $256 million, up 8.3% year on year, backed by solid price/mix and positive currency movements, which offset lower volumes stemming from comparisons with a solid year-ago period. Organic sales ascended 6%, backed by snacks.
Revenues in the Asia Pacific, the Middle East & Africa segment totaled $718 million, rising 12.2% year over year, driven by price/mix growth that countered volume declines stemming from lapping solid two-year comparisons. Organic sales increased 17%on strength in snacks, cereal and noodle among others.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $313 million, long-term debt of $5,953 million and total equity of $4,295 million. The company generated cash from operating activities of $327 million in the quarter. Capital expenditures were $138 million, resulting in cash flow of $189 million.
Net cash provided by operating activities is likely to be $1.7-$1.8 billion in 2022, while cash flow is estimated to be $1.1-$1.2 billion. The company expects to incur a capital expenditure of nearly $0.6 billion in 2022.
2022 Guidance
Based on its first-quarter performance, changes in operating landscape and underlying trends, management updated its full-year 2022 organic net sales guidance. Organic net sales growth in 2022 is estimated to be up nearly 4% now, from around 3% growth expected earlier. The raised guidance reflects strong business momentum, especially in snacks globally and noodles in Africa. Also, elevated price/mix is likely to be a driver, which is much needed to counter the additional cost inflation.
Adjusted operating profit is expected to rise 1-2% at cc. The raised net sales view is likely to be countered by increased cost inflation and business hurdles, including impacts from the Russia-Ukraine chaos.
Management expects adjusted earnings per share (EPS) to grow 1-2% at cc, which reflects the impacts of the unchanged profit view, together with reduced effective tax rate and lower other income.
Kellogg currently carries a Zacks Rank #4 (Sell). Shares of the company have gained 10.9% in the past three months compared with the industry’s growth of 2.6%.
Sysco, which engages in the marketing and distribution of various food and related products, carries a Zacks Rank #2 (Buy) at present. Shares of Sysco have jumped 8.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the year-ago reported number. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.
McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. Shares of McCormick have dipped 2.1% in the past three months.
The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 1.3%, on average.
Inter Parfums, which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. Shares of Inter Parfums have dropped 14% in the past three months.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 12.5% and 10.3%, respectively, from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 46.7%, on average.
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Kellogg's (K) Q1 Earnings Top Estimates, Organic Sales View Up
Kellogg Company (K - Free Report) delivered robust first-quarter 2022 results, wherein both top and bottom lines surpassed the Zacks Consensus Estimate while the former grew year over year. The robust performance was backed by strength in snacks brands across all four regions, as well as favorable price mix stemming from the company’s revenue growth management. These helped the company amid a tough business landscape, with economy-wide shortages and elevated cost inflation that was aggravated by the Ukraine war.
The company is progressing well toward reviving sales and inventory in its North America cereal business, which was hurt by the fire and labor strike at its manufacturing network in the second half of 2021. Management raised its organic net sales guidance while keeping other forecasts unchanged.
Quarter in Detail
Adjusted earnings of $1.10 per share declined 0.9% year over year. On a constant currency or cc basis, adjusted earnings per share dipped 0.9% to $1.12. Nevertheless, the bottom line exceeded the Zacks Consensus Estimate of 91 cents.
Kellogg Company Price, Consensus and EPS Surprise
Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote
The company reported net sales of $3,672 million, which advanced 2.4% year on year and surpassed the consensus mark of $3,582 million. Net sales growth was backed by favorable price/mix, strength in international regions and growth in snacks brands across all four regions. This was partially countered by currency headwinds, and inadequate finished goods inventory in North America cereal stemming from the aforementioned fire outbreak and labor strike in the second half of 2021. Organic net sales increased 4.2%.
Adjusted operating profit fell 4.3% to $476 million, while the same declined 2.4% to $485 million at cc.
Segment Discussion
Sales in the North America segment amounted to $2,109 million, declining 0.9% year over year. The downside was caused by soft volumes due to lapping robust two-year comparisons, as well as supply hurdles mainly related to cereal inventory, resulting from the abovementioned fire and labor strike. This was partly made up by strong snacks brands performance and favorable price/mix stemming from the company’s revenue growth management. Net sales dipped less than 1% on an organic basis.
Revenues in the Europe segment totaled $589 million, up 1.9% year on year, with positive price/mix more than compensating for adverse impacts from lapping solid two-year comparisons and major currency headwinds. Organic net sales jumped 8% thanks to strength in snacks.
Revenues in Latin America totaled $256 million, up 8.3% year on year, backed by solid price/mix and positive currency movements, which offset lower volumes stemming from comparisons with a solid year-ago period. Organic sales ascended 6%, backed by snacks.
Revenues in the Asia Pacific, the Middle East & Africa segment totaled $718 million, rising 12.2% year over year, driven by price/mix growth that countered volume declines stemming from lapping solid two-year comparisons. Organic sales increased 17%on strength in snacks, cereal and noodle among others.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $313 million, long-term debt of $5,953 million and total equity of $4,295 million. The company generated cash from operating activities of $327 million in the quarter. Capital expenditures were $138 million, resulting in cash flow of $189 million.
Net cash provided by operating activities is likely to be $1.7-$1.8 billion in 2022, while cash flow is estimated to be $1.1-$1.2 billion. The company expects to incur a capital expenditure of nearly $0.6 billion in 2022.
2022 Guidance
Based on its first-quarter performance, changes in operating landscape and underlying trends, management updated its full-year 2022 organic net sales guidance. Organic net sales growth in 2022 is estimated to be up nearly 4% now, from around 3% growth expected earlier. The raised guidance reflects strong business momentum, especially in snacks globally and noodles in Africa. Also, elevated price/mix is likely to be a driver, which is much needed to counter the additional cost inflation.
Adjusted operating profit is expected to rise 1-2% at cc. The raised net sales view is likely to be countered by increased cost inflation and business hurdles, including impacts from the Russia-Ukraine chaos.
Management expects adjusted earnings per share (EPS) to grow 1-2% at cc, which reflects the impacts of the unchanged profit view, together with reduced effective tax rate and lower other income.
Kellogg currently carries a Zacks Rank #4 (Sell). Shares of the company have gained 10.9% in the past three months compared with the industry’s growth of 2.6%.
Looking for Consumer Staple Stocks? Check These
Some better-ranked stocks are Sysco Corporation (SYY - Free Report) , McCormick & Company (MKC - Free Report) and Inter Parfums (IPAR - Free Report) .
Sysco, which engages in the marketing and distribution of various food and related products, carries a Zacks Rank #2 (Buy) at present. Shares of Sysco have jumped 8.4% in the past three months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Sysco’s current financial-year sales and EPS suggests growth of 30.4% and 120.1%, respectively, from the year-ago reported number. SYY has a trailing four-quarter earnings surprise of 3.7%, on average.
McCormick, the manufacturer, marketer and distributor of spices, seasoning mixes and condiments, currently carries a Zacks Rank #2. Shares of McCormick have dipped 2.1% in the past three months.
The Zacks Consensus Estimate for McCormick’s current financial-year sales and EPS suggests growth of nearly 5% and 3.9%, respectively, from the year-ago reported figure. MKC has a trailing four-quarter earnings surprise of around 1.3%, on average.
Inter Parfums, which manufactures, markets and distributes a range of fragrances and fragrance-related products, currently carries a Zacks Rank #2. Shares of Inter Parfums have dropped 14% in the past three months.
The Zacks Consensus Estimate for Inter Parfums’ current financial-year sales and EPS suggests growth of 12.5% and 10.3%, respectively, from the year-ago reported figure. IPAR has a trailing four-quarter earnings surprise of 46.7%, on average.