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What’s Expected to Drag Down Kellogg’s Earnings?

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Jun. 13 2019, Published 6:53 p.m. ET

EPS continue to fall

Kellogg’s (K) bottom line has declined in the past two quarters, reflecting weak organic sales and narrow margins. Kellogg’s adjusted EPS fell 2.2% in the fourth quarter of 2018, and by 17.9% in this year’s first quarter. We expect Kellogg’s bottom line to fall by a double-digit percentage the second quarter as the company faces a tough year-over-year comparison of 17.5% growth.

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Expectations for future quarters

Low organic sales and margin contraction could continue to hurt Kellogg’s profitability. Kellogg’s margins could be impacted by its mix shift toward narrow-margin markets, input cost headwinds, and packaging and brand marketing investments, and margin contraction and higher interest expenses could drag down its earnings in the next couple of quarters.

Most packaged food companies’ bottom lines are being hurt by margin contraction and higher interest costs. Analysts expect Kellogg’s bottom line to fall 19.2% in this year’s second quarter, and by a mid-single-digit percentage in the third quarter.

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