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Kellogg Reports Q2 2018 Results: Could the Stock Rise?

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Stronger-than-expected quarter

Kellogg (K) reported better-than-expected second-quarter results on August 2. It has impressed investors so far this year. Its second-quarter sales and earnings topped analysts’ expectations with healthy growth.

Benefits from the acquisition, improving trends in its underlying business, cost-savings, and lower taxes are driving Kellogg’s top and bottom lines. Management was upbeat and raised its 2018 guidance for both sales and earnings, which indicates the company’s improving fundamentals.

However, lower pricing and sluggish margins continue to hurt, which was expected as downward adjustments in list price, input and logistics costs headwinds, and increased advertising and promotional spending remained a drag.

In the third quarter, Kellogg will be annualizing its list price adjustment, which could ease pricing pressures.

Trends are slowly improving for Kellogg on the back of innovation, acquisition, and cost-savings. However, a weakness in its Morning Foods division could continue in the coming quarters, although we should see the rate of decline decelerate.

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YTD stock performance

Kellogg stock has risen 2.8% YTD (year-to-date) as of August 2. It’s one of the few stocks in the food space that’s trading in the green. The stock marked a steep recovery in the past three months, as you can see in the above graph, thanks to improved performance in 2018.

In comparison, shares of major food companies Kraft Heinz (KHC), General Mills (GIS), Campbell Soup (CPB), and Hershey (HSY) have fallen in the double digits YTD.

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