Kellogg Q1 Earnings & Sales Beat Estimates, View Up

Kellogg Company’s (K – Free Report) first-quarter 2018 adjusted earnings and revenues surpassed the Zacks Consensus Estimate. Higher sales, cost-saving initiatives, as well as higher contribution from the acquisitions of protein bar maker RXBAR and Brazilian food group Parati, helped the company offset the industry-wide soft consumption trends for packaged food items.

Earnings Beat

First-quarter comparable earnings of $1.19 per share came ahead of the Zacks Consensus Estimate of $1.07. The bottom line increased 11.2% year over year banking on higher business delivery, lower effective tax rate and reduced restructuring charges.

Revenues Beat

Kellogg reported revenues of $3.4 billion, increasing 4.7% year over year. The upside can be primarily attributed to the October 2017 takeover of RXBAR, improved business delivery along with favorable currency translation. The top line outpaced the consensus mark of $3.32 billion.

Currency and acquisitions had a 2.5% and 1.6% positive impact on revenues in the quarter. Accordingly, organic revenues (excluding the impact of acquisitions, dispositions and foreign exchange) were up 0.6% compared with 1.5% decline in the previous quarter. This marks the company’s best performance in several quarters. Except North America, organic sales increased across all other regions.

Volumes increased 2.9% in the quarter while remaining unchanged in the preceding quarter. Meanwhile, price/mix had a 2.3% adverse impact on sales versus 1.5% negative contribution in the last reported quarter.

Kellogg Company Price, Consensus and EPS Surprise

Kellogg Company Price, Consensus and EPS Surprise | Kellogg Company Quote

Margin Details

Kellogg’s adjusted gross margin (currency-neutral adjusted) in the quarter was down 120 basis points (bps) from the year-ago level.

Kellogg’s operating margin (currency-neutral comparable growth) was 14.7%, reflecting an improvement of 40 bps year over year. The uptick can be attributed to higher sales benefit and strong productivity savings related to the Project K restructuring program, particularly last summer’s exit from its U.S. Snacks segment’s Direct Store Delivery (DSD) system.