Kellogg Company (K Quick QuoteK - Free Report) looks poised as the company has been gaining from the strength of its brands and the solid performance in the EMEA region. On its first-quarter 2022 earnings call, management raised its organic sales guidance for the year. Organic net sales growth in 2022 is estimated to be up nearly 4% now from the around 3% growth expected earlier.

The raised guidance reflects strong business momentum, especially in snacks globally and noodles in Africa. Also, an elevated price/mix is likely to be a driver, which is much needed to counter the additional cost inflation. We note that economy-wide constraints and shortages are concerns for Kellogg. Apart from this, the company has been witnessing a deceleration in its at-home demand as consumer mobility is returning. On its first-quarter earnings call, management highlighted that it continues to expect a deceleration in at-home demand growth.

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Brand Strength & Solid EMEA Performance

Kellogg is dedicated to augmenting its portfolio by adding more products to existing brands, innovation and marketing initiatives. K has been focused on investing in brand-building efforts. It invests in digital media, consumer promotions and traditional advertising. Additionally, the company’s prudent acquisitions have been yielding favorably. Kellogg acquired the protein bar maker, Chicago Bar Company, in 2017. Chicago Bar Company makes RXBAR, which is considered one of the fastest-growing nutrition bar brands in the United States.

Additionally, the company’s Pringles buyout (concluded in May 2012) has been lucrative. Apart from this, the consolidation of Multipro (completed in May 2018), a Nigerian food distributor, has been yielding. Markedly, these acquired businesses are expected to continue supporting the company’s business. Gains from Pringles and Multipro were well-reflected in first-quarter sales.

Moving on, the EMEA has a multi-year track record of organic net sales growth for Kellogg. In the first quarter of 2022, the EMEA saw organic sales growth of 17% and a double-digit rise in net sales and operating profit. This was backed by the company’s revenue growth management, especially for the price realization. The company witnessed net sales growth in the snacks, cereal and noodles categories. Noodles remained the biggest contributor, while the snack improvement was led by Pringles.

All Not Rosy for Kellogg

In the first quarter of 2022, Kellogg’s gross profit of $1,122 million declined from the $1,191 million reported in the year-ago quarter. The downside stemmed from supply bottlenecks and the impacts of the fire and the strike witnessed in the second half of last year. The effect included lost sales and escalated costs. Apart from this, economy-wide constraints and shortages affected the gross margin. Additionally, the adverse mix was a factor. Due to a lower gross profit, as well as tough year-over-year comparisons, the adjusted operating profit fell 4.3% to $476 million, while the same declined 2.4% to $485 million at constant currency or cc.  Management expects witnessing bottlenecks and shortages, at least through the first half of 2022. It expects disruptions associated with the Ukraine war to be more weighted toward the second half.

K’s first-quarter performance was also somewhat hurt by the inadequate finished goods inventory in North America cereal stemming from a fire outbreak and a labor strike in the second half of 2021. Sales in the North America segment amounted to $2,109 million, declining 0.9% year over year. The downside was caused by soft volumes due to lapping robust two-year comparisons and supply hurdles mainly related to the cereal inventory resulting from the abovementioned fire and labor strike.

However, the company is progressing well toward reviving sales and the inventory in its North America cereal business. It also remains on track with its productivity and revenue growth management actions to counter the abovementioned cost headwinds.

Shares of this Zacks Rank #3 (Hold) company have risen 6.9% in the past three months against the industry’s decline of 6.3%.

3 Solid Staple Stocks

Some better-ranked stocks are The Chef's Warehouse (CHEF Quick QuoteCHEF - Free Report) , Sysco Corporation (SYY Quick QuoteSYY - Free Report) and Campbell Soup (CPB Quick QuoteCPB - Free Report) .

The Chef's Warehouse, which engages in the distribution of specialty food products, sports a Zacks Rank #1 (Strong Buy). The Chef's Warehouse has a trailing four-quarter earnings surprise of 372.3%, on average.You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for CHEF’s current financial-year earnings per share (EPS) suggests significant growth from the year-ago reported number.

Sysco, which engages in marketing and distributing various food and related products, carries a Zacks Rank #2 (Buy). Sysco has a trailing four-quarter earnings surprise of 9.1%, on average.

The Zacks Consensus Estimate for SYY’s current financial-year sales and EPS suggests growth of 32.6% and 124.3%, respectively, from the year-ago reported number.

Campbell Soup, which manufactures and markets food and beverage products, currently carries a Zacks Rank #2. Campbell Soup has a trailing four-quarter earnings surprise of 10.8%, on average.

The Zacks Consensus Estimate for CPB’s current financial-year sales suggests growth of 0.5% from the year-ago reported figure.