Breakfast-cereal maker Kellogg (NYSE:K) will report Q4 2006 financial results on Jan. 30, when we'll get to see whether it still has any snap, crackle, and pop left.

What analysts say:

  • Buy, sell, or waffle? Well, analysts think the company's gr-r-r-eat! Of the 22 analysts chowing down on Kellogg's, 16 say buy, and six say hold.
  • Revenues. Revenues are expected to pop 5.8%, to $2.53 billion.
  • Earnings. The profit outlook is a bit soggier, with earnings falling slightly to $0.46 per share, down from the $0.47 per share earned last year.

What management says:
While breakfast cereal isn't the sexiest of businesses, it's a consistently stable one that at times can be affected by external forces, like higher fuel costs or a rise in commodities prices. The strong performance that Kellogg's has been able to maintain throughout most of this year has been because higher fuel costs have caused consumers to cut back on discretionary dining spending and look more toward lower-cost meals at fast-food restaurants or prepared-at-home meals. This has been offset somewhat by rising costs for commodities, like corn and wheat. Food stocks in general, though, have been doing well and, according to Credit Suisse, have risen 17% on average over the past year compared with a 13.5% increase in the S&P 500.

What management does:
The higher costs the company has had to contend with has eaten into its margins, but it has also been able to raise prices for its products to compensate, and that has helped to smooth out net earnings. Expect to see margins narrow in the future too as demand for ethanol, for example, keeps corn prices high.

Margin

09/05

12/05

03/06

06/06

09/06

Gross

46.0%

45.7%

45.5%

45.0%

44.8%

Operating

18.7%

18.1%

17.7%

17.6%

17.4%

Net

9.6%

9.6%

9.7%

9.6%

9.5%
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
As the country's largest cereal maker, Kellogg's is as much a staple as any of its breakfast cereals. While a few other food companies have reported excellent earnings in the past few weeks, and analysts in general are expecting Kellogg's to do as well or better, the pinch may come in 2007 when prices for corn are pushed higher on account of the country's energy policies.

Management is forecasting high-single-digit growth in earnings on low-single-digit growth in sales, both in line with typical company performance. The company can also benefit from being part of a defensive stock class if the economy remains uncertain as investors tend to gravitate towards them. This is an advantage for investors who will also appreciate the conservative, steady growth progress that the company espouses and who might be looking to pinch an inch in their portfolios.

Competitors:

  • General Mills (NYSE:GIS)
  • Kraft Foods (NYSE:KFT)
  • HJ Heinz (NYSE:HNZ)
  • Ralcorp (NYSE:RAH)

Related Foolishness:

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.