As expected, slower sales in the U.S., hurt
) results once again as the world's largest cereal maker barely
managed to beat the Zacks Consensus Estimate for earnings but
missed the same for revenues in the fourth quarter of 2013.
Fourth-quarter adjusted earnings of 83 cents per share came
ahead of the Zacks Consensus Estimate of 82 cents by a penny.
Fourth-quarter earnings increased 18.6% from the prior-year
quarter as a softer top-line performance was offset by overhead
cost savings and lower taxes.
Adjusted earnings exclude integration costs related to the Jun
2012 Pringles acquisition, costs associated with the four-year
efficiency enhancement program Project K and a huge
mark-to-market gain. Including these items, reported earnings
were $2.24 per share, much higher than a loss of 9 cents in the
Revenues & Margins
The world's largest cereal maker reported revenues of $3.50
billion in the quarter, down 1.7% year over year due to another
quarter of soft sales in the U.S. Revenues also slightly missed
the Zacks Consensus Estimate of $3.51 billion.
While volumes declined 1.6%, price/mix added 0.7% to sales.
Currency had a negative impact of 0.8%. Acquisitions and
dispositions' impact was flat. Accordingly, organic revenues
(excluding impact of acquisitions, dispositions and foreign
exchange) declined 0.9% as improved sales in international
markets was offset by relatively weaker sales in the U.S.
Kellogg's adjusted operating profit grew 8.8% to $1.26 billion
as weak profits in the U.S. were offset by strong gains in Asia
Pacific and Europe.
: Kellogg North America sales decreased 2.8% (down 2.6%
organically) from the prior-year quarter to $2.25 billion in the
fourth quarter, hurt again by choppy sales in cereals and snacks.
Price/mix added 0.4% to revenue growth, while volumes declined
Organically, the U.S. Morning Foods and U.S. Snacks businesses
declined 4% and 3.5%, respectively. Kellogg has seen
slower-than-expected sales growth in the U.S. for three quarters
in a row due to sluggishness in snacks and cereals - two of
Kellogg's largest businesses. While sluggish category growth is
hurting cereals, weakness in crackers and cookies is taking a
toll on the snacks business.
While the U.S. Specialty Channels business grew 5.1%
organically, the North America Other business declined 2.9%.
Adjusted operating profit declined 2.9% to $223 million in the
quarter due to weak volumes.
Revenues in Europe improved 1.2% organically to $716 million.
Asia Pacific grew 4.2% organically to $254 million, while Latin
America grew 3.0 % in the quarter to $281 million.
Adjusted operating profit declined 4.7% in Latin America but
grew 143.3% in Asia Pacific and 15.3% in Europe.
In fiscal 2013, the company witnessed a 4.2% increase in
revenues to $14.79 billion, marginally missing the Zacks
Consensus Estimate of $14.82 billion. The growth rate was at the
lower end of the company's guidance range of 4%-5%. Organically,
sales increased 0.3% in the year.
Adjusted earnings were $3.77 per share, which beat the Zacks
Consensus Estimate of $3.76 by a penny. Adjusted earnings grew
4.4% year over year and were in line with management's
expectation of being toward the lower end of the guidance range
of $3.75 to $3.84.
Introduced 2014 Guidance
In 2014, organic revenues are expected to increase
approximately 1%, which is slightly better than the 2013 level.
Also, adjusted operating profit is expected to either remain flat
or grow up to 2% in the year. Adjusted earnings per share
(excluding currency headwinds) are expected to increase in a
range of 1%-3%.
The adjusted operating profit and earnings guidance exclude
the impact of market adjustments, costs related to Project K, and
the expected benefit from an extra week in 2014.
Other Stocks to Consider
Kellogg currently carries a Zacks Rank #3 (Hold).
Better-ranked food stocks include
Green Mountain Coffee Roasters, Inc
The Hain Celestial Group Inc.
Kraft Foods Group, Inc
). While Green Mountain and Hain Celestial sport a Zacks Rank #1
(Strong Buy), Kraft enjoys a Zacks Rank #2 (Buy).
GREEN MTN COFFE (GMCR): Free Stock Analysis
HAIN CELESTIAL (HAIN): Free Stock Analysis
KELLOGG CO (K): Free Stock Analysis Report
KRAFT FOODS GRP (KRFT): Free Stock Analysis
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