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Here's All You Should Note Before Kellogg's (K) Q3 Earnings

Kellogg Company K is likely to report an increase in the top line when it releases third-quarter 2020 numbers on Oct 29. While the Zacks Consensus Estimate for earnings has gone up a cent in the past 30 days to 88 cents per share, it suggests a 14.6% increase from the year-ago period’s reported figure. Notably, Kellogg delivered an earnings surprise of 33.3% in the last reported quarter. Also, this provider of ready-to-eat cereals and convenience foods has a trailing four-quarter earnings surprise of 14.4%, on average.

The Zacks Consensus Estimate for revenues is pegged at $3,421 million, indicating a rise of 0.8% from the prior-year quarter’s reported figure.

Kellogg Company Price, Consensus and EPS Surprise

Kellogg Company Price, Consensus and EPS Surprise

Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote

Key Factors to Note

Kellogg has been benefiting from increased demand for packaged food products amid the coronavirus-led stockpiling. Such trends also helped the company retain its organic sales trend in second-quarter 2020, wherein the metric grew across regions mostly due to elevated cereal sales that compensated for declines in snack sales. Demand increase for packaged food owing to the pandemic-led higher at-home consumption has been working well for Kellogg’s retail channel business, helping it counter the declines in food sold in the away-from-home network.

In the second-quarter earnings call, management stated that it expects a slowdown in net sales growth in the second half of the year. The company said that it expects sluggishness in the travel-related away-from-home sales for a while. Further, Kellogg expects a deceleration in at-home demand in developed markets throughout the third quarter. The company expects the away-from-home business to remain soft and the emerging markets to continue reeling under pandemic-led disruptions and economic recession in the second half of 2020.

Further, the company expects pressure on the gross margin in the second half due to the absence of divestiture-related benefits, a slowdown in volumes, COVID-19-related costs and lower productivity savings, among other factors. In its last earnings release, Kellogg said that it expects to sustain direct costs associated with sanitization, safety and labor. Also, the company pushed certain investments related to brands, supply chain and commercial plans to the second half of 2020. These are likely to have put pressure on operating profits in the second half, especially in the third quarter. Nonetheless, Kellogg has been on track with its saving efforts.

What the Zacks Model Unveils

Our proven model doesn’t conclusively predict an earnings beat for Kellogg this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Kellogg currently has a Zacks Rank #3 and an Earnings ESP of -3.93%.

Stocks With Favorable Combinations

Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

Nu Skin NUS has an Earnings ESP of +3.54% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Newell Brands NWL has an Earnings ESP of +0.33% and a Zacks Rank #2.

Estee Lauder EL has an Earnings ESP of +4.57% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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