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Kellogg (K) Q1 Earnings & Sales Beat Estimates, Down Y/Y
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Kellogg Company (K - Free Report) ) reported first-quarter 2020 results, with both earnings and sales surpassing the Zacks Consensus Estimate. However, both metrics declined year over year due to impacts from the divestiture of the cookies, fruit snacks, pie crusts and ice-cream cone businesses (concluded in July 2019). However, results gained from a considerable increase in global demand for packaged foods in March, as the coronavirus-led stay-at-home trend has been leading consumers to hoard stocks.
Kellogg reiterated its guidance for 2020, expecting a shift in sales and earnings toward the first half of the year.
Quarter in Detail
Adjusted earnings of 99 cents per share dipped 2% year over year, though it beat the Zacks Consensus Estimate of 94 cents. Results were hurt by the absence of divested businesses, partly compensated by growth in other businesses. On a constant-currency (cc) basis, adjusted earnings came in at $1 per share, which dipped 1% from the year-ago quarter’s figure.
The company delivered net sales of $3,412 million, which slipped 3.1% year over year. Nevertheless, the figure surpassed the consensus mark of $3,356 million. The year-over-year downside was caused by impacts from the divestiture of the company’s cookies, fruit snacks, pie crusts and ice-cream cone businesses. Absence of the divested businesses affected sales by about 9%. Also, currency headwinds had a roughly 2% impact on the top line.
Organic sales (excluding currency and divestitures) moved up 8% to $3,464 million. Management highlighted that more than half of the first-quarter growth was attributable to increased buying of consumers due to the coronavirus-led stockpiling. Apart from this, organic sales were backed by underlying business growth across categories and regions.
Adjusted operating profit fell 5.7% to $439 million, owing to currency headwinds and the absence of the divested businesses. The metric dropped 4.4% to $445 million at cc.
Segment Discussion
Sales in the North America segment amounted to $2,097 million, down 8.4% due to divestiture impacts. Sales grew 6% on an organic basis, courtesy of consumption gains in core brands and categories along with increased shipments to support burgeoning demand for packaged food amid the coronavirus-led lockdown. Moreover, adjusted operating profit declined nearly 7% at cc.
Revenues in the Europe segment totaled $526 million, up 5.9% year on year, despite currency headwinds. Further, sales rose about 9% on an organic basis, on the back of increased packaged food demand. Adjusted operating profit improved roughly 7% at cc.
Revenues in Latin America totaled $226 million, up 0.8% year on year even amid major currency woes. Sales grew 11% on an organic basis, thanks to the coronavirus-led stock hoarding of packaged goods. Adjusted operating profit improved by 4% at cc on the back of improved sales.
Revenues in the Asia, Middle East & Africa segment totaled $562 million, up 10% year over year, despite currency headwinds. Sales improved about 13% on an organic basis, backed by strength in emerging markets, especially Nigeria. Further, sales were backed by increased demand for packaged foods amid the coronavirus crisis in Australia, New Zealand, Japan and South Africa. Thanks to higher sales, adjusted operating profit rose 5% at cc.
Other Financials
Kellogg ended the quarter with cash and cash equivalents of $1,016 million, long-term debt of $7,163 million and total equity of $3,212 million. In the first quarter, the company generated cash from operating activities of $391 million.
Cash flow from operating activities is likely to be $1.5-$1.6 billion in 2020. Capital expenditures are expected to be roughly $0.6 billion and cash flow is still expected in the range of $0.9-$1 billion.
2020 Guidance
Management reiterated its 2020 guidance. The company now expects sales and profits to flow in more during the first half. Organic sales in 2020 are still expected to grow 1-2%. Adjusted operating profit is expected to decline 4% at cc and adjusted earnings to drop 3-4% at cc due to divestiture impacts.
Price Performance
This Zacks Rank #3 (Hold) stock has dropped 6.1% year to date compared with the industry’s decline of 10.9%.
Campbell Soup Company (CPB - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #1.
Smucker (SJM - Free Report) , with a Zacks Rank #1, has a trailing four-quarter positive earnings surprise of around 2%, on average.
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Kellogg (K) Q1 Earnings & Sales Beat Estimates, Down Y/Y
Kellogg Company (K - Free Report) ) reported first-quarter 2020 results, with both earnings and sales surpassing the Zacks Consensus Estimate. However, both metrics declined year over year due to impacts from the divestiture of the cookies, fruit snacks, pie crusts and ice-cream cone businesses (concluded in July 2019). However, results gained from a considerable increase in global demand for packaged foods in March, as the coronavirus-led stay-at-home trend has been leading consumers to hoard stocks.
Kellogg reiterated its guidance for 2020, expecting a shift in sales and earnings toward the first half of the year.
Quarter in Detail
Adjusted earnings of 99 cents per share dipped 2% year over year, though it beat the Zacks Consensus Estimate of 94 cents. Results were hurt by the absence of divested businesses, partly compensated by growth in other businesses. On a constant-currency (cc) basis, adjusted earnings came in at $1 per share, which dipped 1% from the year-ago quarter’s figure.
Kellogg Company Price, Consensus and EPS Surprise
Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote
The company delivered net sales of $3,412 million, which slipped 3.1% year over year. Nevertheless, the figure surpassed the consensus mark of $3,356 million. The year-over-year downside was caused by impacts from the divestiture of the company’s cookies, fruit snacks, pie crusts and ice-cream cone businesses. Absence of the divested businesses affected sales by about 9%. Also, currency headwinds had a roughly 2% impact on the top line.
Organic sales (excluding currency and divestitures) moved up 8% to $3,464 million. Management highlighted that more than half of the first-quarter growth was attributable to increased buying of consumers due to the coronavirus-led stockpiling. Apart from this, organic sales were backed by underlying business growth across categories and regions.
Adjusted operating profit fell 5.7% to $439 million, owing to currency headwinds and the absence of the divested businesses. The metric dropped 4.4% to $445 million at cc.
Segment Discussion
Sales in the North America segment amounted to $2,097 million, down 8.4% due to divestiture impacts. Sales grew 6% on an organic basis, courtesy of consumption gains in core brands and categories along with increased shipments to support burgeoning demand for packaged food amid the coronavirus-led lockdown. Moreover, adjusted operating profit declined nearly 7% at cc.
Revenues in the Europe segment totaled $526 million, up 5.9% year on year, despite currency headwinds. Further, sales rose about 9% on an organic basis, on the back of increased packaged food demand. Adjusted operating profit improved roughly 7% at cc.
Revenues in Latin America totaled $226 million, up 0.8% year on year even amid major currency woes. Sales grew 11% on an organic basis, thanks to the coronavirus-led stock hoarding of packaged goods. Adjusted operating profit improved by 4% at cc on the back of improved sales.
Revenues in the Asia, Middle East & Africa segment totaled $562 million, up 10% year over year, despite currency headwinds. Sales improved about 13% on an organic basis, backed by strength in emerging markets, especially Nigeria. Further, sales were backed by increased demand for packaged foods amid the coronavirus crisis in Australia, New Zealand, Japan and South Africa. Thanks to higher sales, adjusted operating profit rose 5% at cc.
Other Financials
Kellogg ended the quarter with cash and cash equivalents of $1,016 million, long-term debt of $7,163 million and total equity of $3,212 million. In the first quarter, the company generated cash from operating activities of $391 million.
Cash flow from operating activities is likely to be $1.5-$1.6 billion in 2020. Capital expenditures are expected to be roughly $0.6 billion and cash flow is still expected in the range of $0.9-$1 billion.
2020 Guidance
Management reiterated its 2020 guidance. The company now expects sales and profits to flow in more during the first half. Organic sales in 2020 are still expected to grow 1-2%. Adjusted operating profit is expected to decline 4% at cc and adjusted earnings to drop 3-4% at cc due to divestiture impacts.
Price Performance
This Zacks Rank #3 (Hold) stock has dropped 6.1% year to date compared with the industry’s decline of 10.9%.
Looking for Promising Food Stocks? Check These
The Hain Celestial Group, Inc. (HAIN - Free Report) , with a Zacks Rank #1 (Strong Buy), has a trailing four-quarter positive earnings surprise of around 7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Campbell Soup Company (CPB - Free Report) has a long-term earnings growth rate of 7.2% and a Zacks Rank #1.
Smucker (SJM - Free Report) , with a Zacks Rank #1, has a trailing four-quarter positive earnings surprise of around 2%, on average.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>