Kellogg Surprised Investors with 3Q17 Results: Stock Rises 6.2%
Strong quarter lifted investor sentiment
Kellogg (K) surprised investors on Tuesday, October 31, 2017, with strong 3Q17 results. After the earnings release, Kellogg stock rose 6.2% and closed at $62.53. The company surpassed Wall Street’s expectations for both sales and earnings. Sales improved marginally thanks to the Parati acquisition in Brazil and the return to growth for Pringles in Europe.
Kellogg’s bottom line rose as higher savings from supply chain restructuring and a focus on cost reductions more than offset the negatives stemming from volume deleveraging and a higher effective tax rate. Analysts projected the company’s top and bottom lines to fall on a YoY (year-over-year) basis in 3Q17.
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Management reiterated its sales and profitability guidance for 2017 despite strong 3Q17 results. Weak volume trends and increased investments in brand building are expected to restrict its top and bottom line growth rate.
Kellogg stock has fallen 15.2% on a YTD (year-to-date) basis as of October 31, 2017. Sluggish sales performance kept analysts at bay. Its strong 3Q17 results, innovative product pipeline, and overhead savings from the DSD (direct-store delivery) transition seem to have lifted investor sentiment for the stock.
But similar to most of its peers, Kellogg has significantly unperformed the S&P 500 (SPX-INDEX). The benchmark index has risen 14.9% YTD.