Kellogg In-Line, Reaffirms Outlook - Analyst Blog

Kellogg Company (K), one of the world's largest cereal makers, recently posted feeble net sales results due to stiff competition and softness in the cereal category.

The quarterly earnings of 51 cents a share came in line with the Zacks Consensus Estimate and surged 10.9% from the prior-year quarter. The Zacks Consensus Estimate was stable prior to the earnings release, over the past 30 days.

For fiscal 2010, earnings came in at $3.30 a share, reflecting a 4% increase versus fiscal 2009. Annual earnings were also in line with the Zacks Consensus Estimate.

Kellogg reaffirmed its fiscal 2011 earnings per share growth target in the low single-digit range.

Revenues

As per Kellogg, total revenue for the quarter decreased 1.4% to $2,860.0 million, defeating the Zacks Consensus Estimate of $2,855.0 million. Excluding the effect of foreign currency translation, net sales remained flat during the reported quarter.

Annual revenues also contracted marginally by 1.4% to $12.3 billion, which were below the Zacks Consensus Estimate of $12,424 billion.

Kellogg's expects net sales to grow in the range of 3.0% to 4.0%, excluding foreign currency translation.

Segment Details

Kellogg North America sales, both including and excluding foreign currency translation remained flat at $1,933.0 million, reflecting sustained aggressive drifts in the cereal category. Operating profit, both including and excluding foreign currency translation, plunged 10.0% to $293.0 million.

Kellogg International sales declined 4.0% to $927.0 million. Excluding foreign currency translation, International sales declined 1.0% during the quarter, registering sales growth rates of 0.5% in Latin America and 9.2% in Asia-Pacific regions, with a decline of 10.1% in Europe.

Operating profit remained even compared to the same period last year. However, excluding foreign currency translation, operating profit jumped 10.0% during the quarter.

Other Financial Details

The company ended the year with cash and cash equivalents of $444.0 million, total long-term debt of $5,860.0 million and shareholders' equity of $2,158.0 million.

The company repurchased shares worth about $1 billion during fiscal 2010. Capital expenditures for the year amounted to $474 million.

Headquartered in Battle Creek, Michigan, Kellogg Company manufactures and markets ready-to-eat cereals and convenience foods (including cookies, crackers, toaster pastries, cereal bars, and frozen waffles). The company primarily competes with General Mills Inc. (GIS) and ConAgra Foods Inc (CAG) and currently we maintain a long-term Neutral recommendation on the stock. Kellogg also holds a Zacks #4 Rank, which translates in to a short-term Sell rating.