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Could Kellogg Surpass Its Fiscal 3Q17 Earnings Estimate?

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Dec. 4 2020, Updated 10:52 a.m. ET

Analysts expect EPS to decline

Kellogg (K) is scheduled to announce its fiscal 3Q17 earnings on Tuesday, October 31. Analysts on average expect the company to post earnings per share (or EPS) of $0.94, down 2.1% on a YoY (year-over-year) basis.

Weak consumption in the US (SPY), challenges in Europe, and increased competition is expected to result in lower volumes. These trends could affect Kellogg’s bottom-line performance. The company has exceeded analysts’ estimates in the past four consecutive quarters despite a decline in volumes.

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Factors that could impact Kellogg’s EPS

Kellogg’s EPS could benefit from productivity savings and cost reductions. Improvement in pricing and mix is projected to drive its bottom-line growth. Currency headwinds are also expected to subside, which should support its EPS growth.

Kellogg’s management expects its EPS to be $3.97–$4.03 in fiscal 2017, driven by higher cost savings and efficiency. However, the anticipated decrease in volumes due to lower demand, tough YoY comparables, and a challenging retail landscape could pressure the stock.

The EPS for Kellogg’s peers are expected to take a hit from inflation in input costs and declining volumes. Citing challenges to profitability, Goldman Sachs recently downgraded Kraft Heinz (KHC) stock in anticipation of lower earnings.

General Mills(GIS) 2Q17 earnings per share were adversely impacted by sluggish volumes and increased input costs. Plus, J.M. Smucker’s (SJM) 2Q17 EPS fell on higher costs and lower volumes.

However, Mondelēz International’s (MDLZ) 3Q17 earnings are projected to improve on higher sales and lower advertising and overhead expenses. However, higher costs of dairy products are expected to pressure its stock.

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