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Kellogg Company (K - Free Report) delivered robust second-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Earnings and net sales increased year over year. Taking into account better-than-anticipated first-half results, underlying momentum and revenue growth management action the company raised its 2022 view.
Kellogg saw solid momentum in snacks and emerging markets during the quarter. It accelerated the recovery of supply and category share across the North America cereal business while leveraging productivity initiatives along with revenue growth management amid escalating input cost inflation. Also, the company is on track with its recently announced proposed separation of the North America Cereal and Plant-based businesses. The company expects to conclude it by 2023-end.
Kellogg reported adjusted earnings of $1.18 per share that came ahead of the Zacks Consensus Estimate of $1.05 and our estimate of $1.03. The bottom line grew 3.5% year over year. On a constant currency or cc basis, adjusted earnings per share jumped 7.9% to $1.23.
The company reported net sales of $3,864 million that came ahead of the Zacks Consensus Estimate of $3,644.6 million and our estimate of $3,662.1 million. The top line advanced 8.7% year on year. Net sales growth was backed by favorable price/mix and in-market momentum in snacks, noodles and other as well as international cereal along with a faster-than-anticipated rebound across North America cereal. These factors more than offset the impacts of unfavorable currency rates and price elasticity. Organic net sales (excluding currency impact) increased by more than 12%.
Adjusted operating profit increased 6.5% to $529 million, while the same grew 9.9% to $546 million at cc.
Segment Discussion
Sales in the North America segment amounted to $2,249 million, increasing 11.8% year over year. The metric came ahead of the Zacks consensus mark of $2,054 million and our estimate of $2,013 million. The upside in sales can be attributed to favorable price/mix growth from revenue management actions. Also, volume growth associated with in-market momentum in snacks along with faster-than-anticipated recovery in shipments and share in North America cereal were upsides. Net sales grew 12.2% on an organic basis.
Revenues in the Europe segment totaled $598 million, down 3.3% year on year, with unfavorable currency rates more than offsetting price/mix and net sales momentum across snacks and cereal. The metric lagged the Zacks consensus mark of $605.6 million and our estimate of $653.2 million. Nevertheless, organic net sales jumped 7.7%.
Revenues in Latin America totaled $288 million, up 8.2% year on year, backed by solid price/mix and net sales momentum in snacks. Unfavorable foreign currency rates were a concern. The metric came ahead of the Zacks consensus mark of $280.6 million and our estimate of $285.9 million. Organic sales ascended 9%.
Revenues in the Asia Pacific, the Middle East & Africa segment totaled $732 million, rising 11.2% year over year, driven by favorable price/mix and sales momentum in snacks, noodles and other as well as cereal. Unfavorable foreign currency rates were a concern. Revenues came ahead of the Zacks consensus mark of $711.9 million and our estimate of $710 million. Organic sales increased 18.4%.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $323 million, long-term debt of $5,838 million and total equity of $4,558 million. The company generated cash from operating activities of $805 million for year-to-date ended Jul 2, 2022. Capital expenditures were $267 million, resulting in cash flow of $538 million.
Net cash provided by operating activities is likely to be nearly $1.8 billion in 2022, while cash flow is estimated to be roughly $1.2 billion. The company expects to incur a capital expenditure of nearly $0.6 billion in 2022.
Image Source: Zacks Investment Research
2022 Guidance
Considering its solid first-half performance, underlying trends and confidence in its plans for the back half of 2022, management raised its 2022 guidance.
Organic net sales growth in 2022 is now estimated to be up 7-8%, from nearly 4% growth expected earlier. The raised view reflects better-than-anticipated growth during the first half of the year, actions related to revenue growth management along with impressive in-market momentum, especially in snacks and emerging markets.
Adjusted operating profit is expected to rise 4-5% at cc, up from previous view of 1-2% improvement at cc. Management expects adjusted earnings per share (EPS) to grow almost 2% at cc, up from prior guidance of 1-2% growth at cc. The view considers better operating profit outlook.
Kellogg currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 5.3% in the past three months against the industry’s 0.6% decline.
United Natural Foods distributes natural, organic, specialty, produce and conventional grocery and non-food products. UNFI currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for UNFI’s current financial year sales suggests 7.6% growth from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1. CHEF has a trailing four-quarter earnings surprise of 355.9%, on average.
The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales suggests growth of 40.7%from the year-ago reported numbers.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 6.5%, on average.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and earnings per share suggests growth of almost 2% and 1.5%, respectively, from the corresponding year-ago reported figures.
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Kellogg's (K) Q2 Earnings & Sales Top Estimates, 2022 View Raised
Kellogg Company (K - Free Report) delivered robust second-quarter 2022 results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Earnings and net sales increased year over year. Taking into account better-than-anticipated first-half results, underlying momentum and revenue growth management action the company raised its 2022 view.
Kellogg saw solid momentum in snacks and emerging markets during the quarter. It accelerated the recovery of supply and category share across the North America cereal business while leveraging productivity initiatives along with revenue growth management amid escalating input cost inflation. Also, the company is on track with its recently announced proposed separation of the North America Cereal and Plant-based businesses. The company expects to conclude it by 2023-end.
Kellogg Company Price, Consensus and EPS Surprise
Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote
Quarter in Detail
Kellogg reported adjusted earnings of $1.18 per share that came ahead of the Zacks Consensus Estimate of $1.05 and our estimate of $1.03. The bottom line grew 3.5% year over year. On a constant currency or cc basis, adjusted earnings per share jumped 7.9% to $1.23.
The company reported net sales of $3,864 million that came ahead of the Zacks Consensus Estimate of $3,644.6 million and our estimate of $3,662.1 million. The top line advanced 8.7% year on year. Net sales growth was backed by favorable price/mix and in-market momentum in snacks, noodles and other as well as international cereal along with a faster-than-anticipated rebound across North America cereal. These factors more than offset the impacts of unfavorable currency rates and price elasticity. Organic net sales (excluding currency impact) increased by more than 12%.
Adjusted operating profit increased 6.5% to $529 million, while the same grew 9.9% to $546 million at cc.
Segment Discussion
Sales in the North America segment amounted to $2,249 million, increasing 11.8% year over year. The metric came ahead of the Zacks consensus mark of $2,054 million and our estimate of $2,013 million. The upside in sales can be attributed to favorable price/mix growth from revenue management actions. Also, volume growth associated with in-market momentum in snacks along with faster-than-anticipated recovery in shipments and share in North America cereal were upsides. Net sales grew 12.2% on an organic basis.
Revenues in the Europe segment totaled $598 million, down 3.3% year on year, with unfavorable currency rates more than offsetting price/mix and net sales momentum across snacks and cereal. The metric lagged the Zacks consensus mark of $605.6 million and our estimate of $653.2 million. Nevertheless, organic net sales jumped 7.7%.
Revenues in Latin America totaled $288 million, up 8.2% year on year, backed by solid price/mix and net sales momentum in snacks. Unfavorable foreign currency rates were a concern. The metric came ahead of the Zacks consensus mark of $280.6 million and our estimate of $285.9 million. Organic sales ascended 9%.
Revenues in the Asia Pacific, the Middle East & Africa segment totaled $732 million, rising 11.2% year over year, driven by favorable price/mix and sales momentum in snacks, noodles and other as well as cereal. Unfavorable foreign currency rates were a concern. Revenues came ahead of the Zacks consensus mark of $711.9 million and our estimate of $710 million. Organic sales increased 18.4%.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $323 million, long-term debt of $5,838 million and total equity of $4,558 million. The company generated cash from operating activities of $805 million for year-to-date ended Jul 2, 2022. Capital expenditures were $267 million, resulting in cash flow of $538 million.
Net cash provided by operating activities is likely to be nearly $1.8 billion in 2022, while cash flow is estimated to be roughly $1.2 billion. The company expects to incur a capital expenditure of nearly $0.6 billion in 2022.
Image Source: Zacks Investment Research
2022 Guidance
Considering its solid first-half performance, underlying trends and confidence in its plans for the back half of 2022, management raised its 2022 guidance.
Organic net sales growth in 2022 is now estimated to be up 7-8%, from nearly 4% growth expected earlier. The raised view reflects better-than-anticipated growth during the first half of the year, actions related to revenue growth management along with impressive in-market momentum, especially in snacks and emerging markets.
Adjusted operating profit is expected to rise 4-5% at cc, up from previous view of 1-2% improvement at cc. Management expects adjusted earnings per share (EPS) to grow almost 2% at cc, up from prior guidance of 1-2% growth at cc. The view considers better operating profit outlook.
Kellogg currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 5.3% in the past three months against the industry’s 0.6% decline.
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Some better-ranked stocks are United Natural Foods (UNFI - Free Report) , The Chef's Warehouse (CHEF - Free Report) and General Mills, Inc. (GIS - Free Report) .
United Natural Foods distributes natural, organic, specialty, produce and conventional grocery and non-food products. UNFI currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for UNFI’s current financial year sales suggests 7.6% growth from the year-ago period’s reported figures. United Natural Foods has a trailing four-quarter earnings surprise of 29.9%, on average.
Chef’s Warehouse, a distributor of specialty food products in the United States, currently flaunts a Zacks Rank #1. CHEF has a trailing four-quarter earnings surprise of 355.9%, on average.
The Zacks Consensus Estimate for Chef Warehouse’s current financial-year sales suggests growth of 40.7%from the year-ago reported numbers.
General Mills, which manufactures and markets branded consumer foods worldwide, currently carries a Zacks Rank of 2 (Buy). GIS has a trailing four-quarter earnings surprise of 6.5%, on average.
The Zacks Consensus Estimate for General Mills’ current financial-year sales and earnings per share suggests growth of almost 2% and 1.5%, respectively, from the corresponding year-ago reported figures.