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Kellogg Gains on Coronavirus-Led Demand, Hurt by Divestitures
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Kellogg Company (K - Free Report) has been benefiting from increased global demand for packaged food products amid the coronavirus-led stockpiling. This also helped the company retain its organic sales trend in first-quarter 2020, wherein both top and bottom lines beat the consensus mark. However, these metrics fell year over year due to the divestiture of the cookies, fruit snacks, pie crusts and ice-cream cones businesses along with currency woes.
Nonetheless, Kellogg is likely to keep gaining from its Deploy for Growth strategy as well as a strong brand portfolio, supported by prudent buyouts and innovation. Shares of this Zacks Rank #3 (Hold) company have gained about 14% in the past year against the industry’s decline of 3.4%. Let’s delve deeper. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coronavirus-Led Demand Aids in Q1
In the first quarter of 2020, organic sales (excluding currency and divestitures) moved up 8% to $3,464 million. Management highlighted that more than half of the first-quarter growth came from increased buying of consumers due to the coronavirus-led stockpiling. Notably, organic sales were backed by underlying business growth across categories and regions. In North America, the company witnessed consumption gains in core brands and categories along with increased shipments to support burgeoning demand for packaged food amid the coronavirus-led lockdown. Sales in all other regions were also backed by increased demand for packaged foods due to higher at-home consumption.
Management still expects organic sales to grow 1-2% in 2020, though it now expects sales and profits to flow in more during the first half. Food companies like Kraft Heinz (KHC - Free Report) , TreeHouse Foods (THS - Free Report) and B&G Foods (BGS - Free Report) have also benefited from increased demand owing to the coronavirus-led stockpiling.
Divestitures & Currency Headwinds
Kellogg delivered first-quarter 2020 net sales of $3,412 million, which slipped 3.1% year over year due to impacts from the divestiture of the company’s cookies, fruit snacks, pie crusts and ice-cream cones businesses. Absence of the divested businesses dragged down sales by about 9% in the first quarter and weighed on on the company’s North American unit. Also, currency headwinds had a roughly 2% impact on the top line. Moreover, adjusted operating profit fell 5.7% to $439 million due to currency headwinds and the absence of the divested businesses.
The divestitures also negatively impacted the bottom line, which dipped 2% year over year to 99 cents per share. For 2020, adjusted operating profit is expected to decline 4% at cc and adjusted earnings to drop 3-4% at cc due to divestiture impacts.
Growth Efforts Underway
Though divestitures are likely to weigh on the company’s results in the near term, such efforts are likely to help focus on other lucrative business platforms and achieve greater efficiency. Moreover, the divestitures have helped the company reduce debt and improve its financial position. In fact, focus on the restructuring portfolio forms part of Kellogg’s Deploy for Growth strategy. Apart from this, the company is progressing with its productivity saving initiatives. We note that it successfully completed the Project K program. Savings from this program are being invested in brand-building initiatives, logistics improvement, sales capabilities and innovation.
Such upsides are likely to work well for Kellogg and help it retain its growth story.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Image: Shutterstock
Kellogg Gains on Coronavirus-Led Demand, Hurt by Divestitures
Kellogg Company (K - Free Report) has been benefiting from increased global demand for packaged food products amid the coronavirus-led stockpiling. This also helped the company retain its organic sales trend in first-quarter 2020, wherein both top and bottom lines beat the consensus mark. However, these metrics fell year over year due to the divestiture of the cookies, fruit snacks, pie crusts and ice-cream cones businesses along with currency woes.
Nonetheless, Kellogg is likely to keep gaining from its Deploy for Growth strategy as well as a strong brand portfolio, supported by prudent buyouts and innovation. Shares of this Zacks Rank #3 (Hold) company have gained about 14% in the past year against the industry’s decline of 3.4%. Let’s delve deeper. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Coronavirus-Led Demand Aids in Q1
In the first quarter of 2020, organic sales (excluding currency and divestitures) moved up 8% to $3,464 million. Management highlighted that more than half of the first-quarter growth came from increased buying of consumers due to the coronavirus-led stockpiling. Notably, organic sales were backed by underlying business growth across categories and regions. In North America, the company witnessed consumption gains in core brands and categories along with increased shipments to support burgeoning demand for packaged food amid the coronavirus-led lockdown. Sales in all other regions were also backed by increased demand for packaged foods due to higher at-home consumption.
Management still expects organic sales to grow 1-2% in 2020, though it now expects sales and profits to flow in more during the first half. Food companies like Kraft Heinz (KHC - Free Report) , TreeHouse Foods (THS - Free Report) and B&G Foods (BGS - Free Report) have also benefited from increased demand owing to the coronavirus-led stockpiling.
Divestitures & Currency Headwinds
Kellogg delivered first-quarter 2020 net sales of $3,412 million, which slipped 3.1% year over year due to impacts from the divestiture of the company’s cookies, fruit snacks, pie crusts and ice-cream cones businesses. Absence of the divested businesses dragged down sales by about 9% in the first quarter and weighed on on the company’s North American unit. Also, currency headwinds had a roughly 2% impact on the top line. Moreover, adjusted operating profit fell 5.7% to $439 million due to currency headwinds and the absence of the divested businesses.
The divestitures also negatively impacted the bottom line, which dipped 2% year over year to 99 cents per share. For 2020, adjusted operating profit is expected to decline 4% at cc and adjusted earnings to drop 3-4% at cc due to divestiture impacts.
Growth Efforts Underway
Though divestitures are likely to weigh on the company’s results in the near term, such efforts are likely to help focus on other lucrative business platforms and achieve greater efficiency. Moreover, the divestitures have helped the company reduce debt and improve its financial position. In fact, focus on the restructuring portfolio forms part of Kellogg’s Deploy for Growth strategy. Apart from this, the company is progressing with its productivity saving initiatives. We note that it successfully completed the Project K program. Savings from this program are being invested in brand-building initiatives, logistics improvement, sales capabilities and innovation.
Such upsides are likely to work well for Kellogg and help it retain its growth story.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2021.
Click here for the 6 trades >>