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Kellogg’s Q4 Sales Might Not Be Impressive

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What to expect?

We expect Kellogg (K) to sustain the sales momentum during the fourth quarter. Kellogg’s top line is expected to benefit from its recent acquisitions including the consolidation of Multipro’s operation. However, the company’s organic sales are expected to be disappointing, which reflects lower pricing and an unfavorable mix.

Weak organic sales, SKU rationalization, and negative currency rates are expected to limit the top-line growth rate between the low to mid-single-digit during the fourth quarter. Kellogg annualized its downward adjustment in the list price during the third quarter, which is expected to ease the pricing pressure. However, the unfavorable mix could continue to hurt the organic sales.

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Food manufacturers in the US are focusing on accelerating their top-line growth rate by expanding into fast-growing segments through acquisitions. Kellogg, McCormick (MKC), General Mills (GIS), Conagra Brands (CAG), J.M. Smucker (SJM), and Hershey (HSY) have acquired fast-growing brands that are driving their top-line growth rate. However, organic sales remain weak, which reflects challenges in the underlying business.

Analysts’ fourth-quarter estimates

Kellogg has beat analysts’ estimate in the past six quarters despite lower pricing, which is impressive. In the fourth quarter, analysts expect Kellogg to post net sales of $3.3 billion—up 3.6% on a YoY basis.

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