) third-quarter 2013 adjusted earnings of 95 cents per share came
ahead of the Zacks Consensus Estimate of 89 cents per share by
6.7%. Third-quarter earnings also increased 2.2% from the
prior-year quarter due to higher operating profit.
Adjusted earnings exclude integration costs related to the
Pringles acquisition and costs associated with Project K.
Including these charges reported earnings were 90 cents per
share, up 1.1% year over year.
The company announced a four-year long efficiency enhancement
program to spur growth namely Project K. The project is aimed at
optimizing supply chain initiatives as well as increasing global
Kellogg had acquired the Pringles snack business from
Procter & Gamble Co.
) in June last year. With the Pringles deal, Kellogg transformed
itself from what was essentially a large U.S. snacks business to
a true global snacks player.
Revenues & Margins
The world's largest cereal maker reported revenues of $3.72
billion in the quarter, down 0.1% year over year, hurt by choppy
cereal and snacks business as well as adverse currency
translation. Revenues, however, beat the Zacks Consensus Estimate
of $3.71 billion.
While volumes were down 0.3%, price/mix added 0.8% to sales.
Volumes were lower than the last quarter. Currency had a negative
impact of 0.6%. Accordingly, organic revenues (excluding impact
of acquisitions, dispositions and foreign exchange) nudged up
Despite a sluggish top line, Kellogg's adjusted operating profit
grew just 0.6% owing to lower operating costs.
: Kellogg North America sales decreased 1.3% (both reported and
organically) from the prior-year quarter to $2.4 billion in the
third quarter, hurt by decline in U.S. morning food segments and
Organically, U.S. Morning Foods declined 2.2%. The U.S. snacks
business declined 3.3%. U.S. Specialty was up 6.2%. The North
America Other segment (includes U.S. Frozen and Canada
businesses) was up 0.3%.
North America segment adjusted operating profit declined 0.7%.
Revenues in Europe grew 3.3% organically thanks to the rebound in
some markets. Asia Pacific grew 2.9% organically helped by better
results from India, Southeast Asia and the Pringles business.
Latin America grew 6.7% in the quarter.
Kellogg now expects its full-year reported earnings to come
toward the lower end of the previously guided range of $3.75 and
$3.84 per share. This reflects weaker-than-expected sales in some
categories. Also, reported earnings per share will include
adverse currency translation of 6 cents per share. Reported sales
growth is now expected to be in the range of 4% to 5% versus
prior expectation of around 5%.
The company expects Project K costs in the range of $175 million
to $200 million for 2013. The savings from the project is
expected to be minimal in 2013.
The company intends to generate around $1.1 to 1.2 billion in
Kellogg carries a Zacks Rank #3 (Hold). However, some other food
companies that are worth a look at the current level are
The J. M. Smucker Co.
Treehouse Foods Inc.
) both carrying a Zacks Rank #2 (Buy).
KELLOGG CO (K): Free Stock Analysis Report
PROCTER & GAMBL (PG): Free Stock Analysis
SMUCKER JM (SJM): Free Stock Analysis Report
TREEHOUSE FOODS (THS): Free Stock Analysis
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