World's leading cereal maker,
) is all set to unveil its third quarter 2012 results before the
market opens on November 1, 2012. The Zacks Consensus Estimate
for the third quarter is 81 cents (estimated year-over-year
growth of 0.66%) on revenues of $3.7 billion (year-over-year
increase of 11.7%).
Second Quarter Recap
Kellogg's second quarter 2012 earnings of 89 cents per share
beat the Zacks Consensus Estimate by 5.9% driven by
better-than-expected revenues. The second quarter earnings
however lagged the prior-year quarter earnings of 94 cents due to
weak revenues in Europe, high commodity costs and investments in
Revenue rose 2.6% year on year to $3.5 billion boosted by the
addition of Pringles and improving revenue trends in North
America. Revenues improved almost 3% from the first quarter, in
line with management expectations of posting sequentially better
revenue growth. Kellogg's acquired
Procter & Gamble
) snack unit that included the iconic brand of potato snack,
Pringles, for $2.7 billion in June 2012.
Management maintained its outlook for 2012 as it expects
better revenue and profit growth in the second half helped by its
brand building investments, increased contribution from
innovation, the addition of Pringles and supply-chain
Agreement of Estimate Revisions
Over the past 30 days, while 2 of 17 estimates for Kellogg's
third quarter 2012 earnings have been revised upward, one moved
in the opposite direction. For full year 2012, one estimate moved
up over the past 30 days and none moved downward. There have been
no estimate revisions over the past 7 days.
We believe the upward trend in estimate revision may be due to
management's expectations that the second half performance will
be better than the first one.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the third quarter of 2012 has
moved up by a cent over the last 30 from 80 cents to 81 cents.
The Zacks Consensus Estimate for 2012 has gone down by 2 cents
from $3.33 to $3.31 over the last 30 days. However, over the last
7 days, the estimate for 2012 has remained static at $3.31.
Kellogg has surpassed earnings estimates in three of the past
four quarters, recording a maximum positive surprise of 5.95% in
the second quarter of 2012. On average, the earnings surprise is
a negative 0.13%.
We currently have a Neutral recommendation on Kellogg. The
stock carries a Zacks #3 Rank (a short-term 'Hold' rating).
We are optimistic about Kellogg's solid brand positioning, its
geographic diversity and cost-saving efforts, especially its
supply-chain initiatives. Moreover, we are encouraged by the
growth potential, diversification and international presence that
the Pringles deal provides. However, its sluggish cereal
business, challenges in Europe and rising input costs keep us on
KELLOGG CO (K): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
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