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Kellogg Reports Mixed Q1 Results, Earnings Remain Pressured


May. 2 2019, Published 11:09 a.m. ET

Key takeaways

The Kellogg Company (K) posted mixed first-quarter earnings results on May 2. Kellogg’s top line missed analysts’ estimate for the second consecutive quarter, reflecting adverse currency rates. However, benefits from the consolidation of Nigerian distributor Multipro’s operations supported the company’s top line, which improved on a YoY (year-over-year) basis.

Kellogg’s organic sales growth remained low, reflecting persisting challenges in its base business. However, higher net price realizations and momentum in the company’s international business supported its organic sales growth.

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In comparison, both the Hershey Company (HSY) and Mondelēz (MDLZ) impressed with their first-quarter organic sales growth rates. Higher pricing and volumes drove the organic sales of these packaged food companies. Meanwhile, the top lines of other major food companies Conagra Brands (CAG), General Mills (GIS), and the Campbell Soup Company (CPB) recorded stellar growth on the back of their recent acquisitions.

Kellogg’s operating income stayed low, reflecting higher input and distribution costs. Meanwhile, currency volatility remained a drag.

Weakness in Kellogg’s base business and cost headwinds dragged its first-quarter earnings down. Increased interest expenses and a higher effective tax rate further suppressed its first-quarter earnings. Kellogg exceeded analysts’ estimate on the back of its lower outstanding share count.

First-quarter financials

Kellogg posted net sales of $3.5 billion, which fell short of analysts’ estimate. However, its net sales increased by 3.5% driven by its Multipro acquisition. Its organic sales inched up 0.3% during the quarter. Kellogg’s adjusted operating income fell 6.9% YoY to $0.5 billion. Meanwhile, it posted adjusted EPS of $1.01, surpassing analysts’ estimate of $0.95 but falling 17.9% on a YoY basis.


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