Food Giant Kellanova Shines Despite Challenges, Sticks To Annual Guidance

Kellanova K reported a first-quarter FY24 sales decline of 4.3% year-on-year to $3.20 billion, beating the analyst consensus estimate of $3.16 billion.

While net sales in the first quarter were negatively impacted by adverse currency translation and the 2023 divestiture of its business in Russia, the company’s organic-basis growth remained at the upper end of its long-term target range.

Adjusted EPS of $1.01 beat the consensus estimate of $0.85.

North America’s sales recorded a slight increase, Europe fell 1%, Latin America’s sales gained 11%, and Asia Pacific, Middle East, and Africa’s (AMEA) sales declined 22%.

Selling, general and administrative expenses remained flat Y/Y at $638 million. Operating margin was 12.3%, and operating income for the quarter increased 13.5% to $393 million.

The company’s reported gross margin expanded 280 basis points to 32.2%, while the adjusted gross margin expanded 470 basis points to 35.7%.

The company held $242 million in cash and equivalents as of March 30 and generated an operating cash flow of $364 million year-to-date.

“We delivered another strong financial performance in the first quarter, marked by improving profit margins and tangible signs that this year’s return to full commercial activity is taking hold in the marketplace and beginning to restore volume and share,” said Chairman, President and CEO Steve Cahillane.

Outlook: Kellanova again reaffirmed its 2024 guidance, calling for net sales and operating profit growth rates that align with its long-term targets.

The company sees FY24 organic net sales growth of 3% or better against a recast 2023 and adjusted operating profit of $1.85 billion – $1.9 billion.

The company sees FY24 adjusted EPS of $3.55 – $3.65 versus an estimate of $3.58.

Price Action: K shares traded higher by 1.18% at $57.65 premarket at the last check Thursday.