By
Colleen Paulson
|
More Articles
July 31, 2008
|
Kellogg (NYSE: K ) and those magical elves over at Keebler fixed up a somewhat tasty second-quarter earnings report, despite rising commodity costs for staples such as corn. With an 11% increase in revenue, overall internal net sales growth (excluding exchange rates) of 6%, and 9% EPS growth for the quarter, Kellogg is actually increasing its earnings guidance for the year to $2.95 to $3.00 per share.
To put things in perspective, recently General Mills (NYSE: GIS ) posted a 13.4% sales increase and a whopping 22.6% increase in cost of goods sold for the quarter, citing price as a major component of the revenue jump. While Kellogg reported a somewhat lower revenue increase than its main breakfast competitor, Kellogg's quarterly cost of goods sold only climbed by 15.9%. With a product portfolio including Cheerios, General Mills may be more susceptible to commodity price jumps, but in any case, Kellogg looks to be watching costs, delivering an overall selling and administrative cost increase of 6.4% even with a double-digit increase in advertising spending.
The food sector has been a mixed bag lately. Kraft Foods (NYSE: KFT ) balanced pricing with commodity price increases to achieve a 6.9% organic earning increase for its second quarter. Heinz (NYSE: HNZ ) is using international sales growth to drive results, and ConAgra (NYSE: CAG ) achieved a 15.5% fourth-quarter revenue increase, but had only a 1.3% increase in operating profits to show for it.
Kellogg's operating profits increased 2% for the quarter on an 11% revenue jump, so certainly increasing commodity prices are cutting into profits. Kellogg is focusing on international sales growth with its recent purchase of China's Zhenghang Foods. Considering the outlook on commodities for the near future, international expansion certainly looks like a good bet to deliver continued snap, crackle, and pop to Kellogg's earnings growth.
For related Foolishness:
RSS Headlines
Fool UK