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Kellogg's (K) Q3 Earnings & Revenues Top Estimates, Up Y/Y
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Kellogg Company (K - Free Report) delivered third-quarter 2021 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. While management pulled up its organic sales growth guidance for 2021, expectations of supply-chain and cost headwinds caused it to reiterate the bottom-line view.
Kellogg expects the current business conditions to prevail in the fourth quarter, especially labor challenges. That said, the company’s underlying business remains solid and it expects to see balanced growth over time.
Quarter in Detail
Adjusted earnings of $1.09 per share advanced 19.8% year over year. On a constant currency or cc basis, the adjusted earnings per share grew 17.6% to $1.07. The bottom line also exceeded the Zacks Consensus Estimate of 95 cents.
The company reported net sales of $3,622 million, which advanced 5.6% year on year and surpassed the consensus mark of $3,539 million. Net sales were backed by favorable price/mix across all regions as well as solid volume gains in emerging markets like Russia, Brazil and Africa. Organic sales (excluding currency movements) increased 5%.
The adjusted operating profit jumped 12.2% to $449 million, while the same rose 11.2% to $445 million at cc.
Sales in the North America segment amounted to $2,055 million, which remained almost flat year over year. Favorable price/mix and positive currency changes were countered by lower volumes stemming from supply headwinds and lapping last year’s exceptional increase. Sales slid less than 1% on an organic basis. A number of key brands retained their robust consumption growth momentum (on a two-year compound annual growth basis). Also, the away-from-home channels continued witnessing revival from the year-ago period’s pandemic-induced downside.
Revenues in the Europe segment totaled $631 million, up nearly 14% year on year, courtesy of currency impacts as well as robust volumes and price/mix. Organic sales rose 12% on strength in Russia and the U.K.
Revenues in Latin America totaled $252 million, up roughly 7% year on year, thanks to currency movements and major strength in Brazil. Organic sales ascended 2%.
Revenues in the Asia Pacific, the Middle East & Africa segment totaled $683 million, rising 17% year over year, despite currency headwinds. Volume gains and improved price/mix in Africa, together with continued cereal sales in Asia and Australia aided results. Organic sales in the segment jumped 20%.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $440 million, long-term debt of $7,020 million and total equity of $4,009 million. In the year-to-date period ended Oct 2, 2021, the company generated cash from operating activities of $1,145 million.
Net cash provided by operating activities is likely to be $1.6-$1.7 billion in 2021, while cash flow is estimated to be $1.1-$1.2 billion.
2021 Guidance
Organic sales growth in 2021 is now estimated to be up 2-3% compared with the flat to increase 1% expected earlier. The updated view suggests a two-year compound annual increase of more than 3%.
Management expects industry-wide and company-specific supply-chain headwinds, as well as the elevated cost inflation to prevail. Consequently, despite raising its organic sales guidance, management reiterated the operating profit, bottom-line and cash flow guidance.
The adjusted operating profit is still expected to decline roughly 1-2% at cc. This indicates a two-year compound annual increase of nearly 4%. The adjusted earnings per share are expected to grow 1-2% at cc, up from 1% growth anticipated earlier. This indicates a two-year compound annual increase of about 5%.
Management stated that the prevailing supply as well as labor-related hurdles can further affect Kellogg’s operating profit, earnings per share and cash flow.
Kellogg currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 4.7% year to date compared with the industry’s growth of 4.1%.
Hain Celestial (HAIN - Free Report) currently carries a Zacks Rank #2 (Buy) and its bottom line outpaced the Zacks Consensus Estimate by 21.2% in the preceding four quarters, on average.
Chef’s Warehouse (CHEF - Free Report) carries a Zacks Rank #2, at present, and its bottom line has outperformed the consensus mark by a wide margin in the last four quarters, on average.
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Kellogg's (K) Q3 Earnings & Revenues Top Estimates, Up Y/Y
Kellogg Company (K - Free Report) delivered third-quarter 2021 results, wherein the top and bottom lines beat the Zacks Consensus Estimate and advanced year over year. While management pulled up its organic sales growth guidance for 2021, expectations of supply-chain and cost headwinds caused it to reiterate the bottom-line view.
Kellogg expects the current business conditions to prevail in the fourth quarter, especially labor challenges. That said, the company’s underlying business remains solid and it expects to see balanced growth over time.
Quarter in Detail
Adjusted earnings of $1.09 per share advanced 19.8% year over year. On a constant currency or cc basis, the adjusted earnings per share grew 17.6% to $1.07. The bottom line also exceeded the Zacks Consensus Estimate of 95 cents.
The company reported net sales of $3,622 million, which advanced 5.6% year on year and surpassed the consensus mark of $3,539 million. Net sales were backed by favorable price/mix across all regions as well as solid volume gains in emerging markets like Russia, Brazil and Africa. Organic sales (excluding currency movements) increased 5%.
The adjusted operating profit jumped 12.2% to $449 million, while the same rose 11.2% to $445 million at cc.
Kellogg Company Price, Consensus and EPS Surprise
Kellogg Company price-consensus-eps-surprise-chart | Kellogg Company Quote
Segment Discussion
Sales in the North America segment amounted to $2,055 million, which remained almost flat year over year. Favorable price/mix and positive currency changes were countered by lower volumes stemming from supply headwinds and lapping last year’s exceptional increase. Sales slid less than 1% on an organic basis. A number of key brands retained their robust consumption growth momentum (on a two-year compound annual growth basis). Also, the away-from-home channels continued witnessing revival from the year-ago period’s pandemic-induced downside.
Revenues in the Europe segment totaled $631 million, up nearly 14% year on year, courtesy of currency impacts as well as robust volumes and price/mix. Organic sales rose 12% on strength in Russia and the U.K.
Revenues in Latin America totaled $252 million, up roughly 7% year on year, thanks to currency movements and major strength in Brazil. Organic sales ascended 2%.
Revenues in the Asia Pacific, the Middle East & Africa segment totaled $683 million, rising 17% year over year, despite currency headwinds. Volume gains and improved price/mix in Africa, together with continued cereal sales in Asia and Australia aided results. Organic sales in the segment jumped 20%.
Other Financials
Kellogg ended the reported quarter with cash and cash equivalents of $440 million, long-term debt of $7,020 million and total equity of $4,009 million. In the year-to-date period ended Oct 2, 2021, the company generated cash from operating activities of $1,145 million.
Net cash provided by operating activities is likely to be $1.6-$1.7 billion in 2021, while cash flow is estimated to be $1.1-$1.2 billion.
2021 Guidance
Organic sales growth in 2021 is now estimated to be up 2-3% compared with the flat to increase 1% expected earlier. The updated view suggests a two-year compound annual increase of more than 3%.
Management expects industry-wide and company-specific supply-chain headwinds, as well as the elevated cost inflation to prevail. Consequently, despite raising its organic sales guidance, management reiterated the operating profit, bottom-line and cash flow guidance.
The adjusted operating profit is still expected to decline roughly 1-2% at cc. This indicates a two-year compound annual increase of nearly 4%. The adjusted earnings per share are expected to grow 1-2% at cc, up from 1% growth anticipated earlier. This indicates a two-year compound annual increase of about 5%.
Management stated that the prevailing supply as well as labor-related hurdles can further affect Kellogg’s operating profit, earnings per share and cash flow.
Kellogg currently carries a Zacks Rank #3 (Hold). Shares of the company have gained 4.7% year to date compared with the industry’s growth of 4.1%.
Looking for Solid Food Stocks? Check These
United Natural (UNFI - Free Report) , which currently flaunts a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 13.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
Hain Celestial (HAIN - Free Report) currently carries a Zacks Rank #2 (Buy) and its bottom line outpaced the Zacks Consensus Estimate by 21.2% in the preceding four quarters, on average.
Chef’s Warehouse (CHEF - Free Report) carries a Zacks Rank #2, at present, and its bottom line has outperformed the consensus mark by a wide margin in the last four quarters, on average.