Kellogg Aims to Impress Wall Street In Its Fourth Quarter Report

Kellogg is about to report its results for the final quarter of 2013 and the current estimates are within reach. Let's decide if we should buy going into the release or if we should wait to see what it has to say.

Feb 1, 2014 at 8:30AM

The Kellogg Company (NYSE:K) has lagged the overall market for the last several years, but it hopes to turn things around and get back on top, starting with 2014. Earnings growth will be the key to its rise and it is set to report fourth-quarter results in just a few days. Let's take a look at the recent performance and expectations for the upcoming quarter to determine if now is time to buy or if we should invest elsewhere.

The king of cereal
Kellogg is the company behind brands such as Kellogg's, Keebler, Special K, Pringles, Frosted Flakes, Pop Tarts, and many more. Kellogg describes itself as the world's leading cereal company, the second largest producer of cookies and crackers, a leading producer of savory snacks, and a leading North American frozen foods company. Today, Kellogg operates facilities in 18 countries and has products available in more than 180.


Source: The Kellogg Company

The last time out
On Nov. 4, Kellogg reported third-quarter earnings that exceeded analyst estimates on both the top and bottom line. Here's a breakdown of the results:

Metric Reported Expected
Earnings Per Share $0.95 $0.89
Revenue $3.72 billion $3.71 billion

Earnings per share increased 6.7% and revenue declined 0.1% year-over-year as Kellogg's gross margin declined 39 basis points to 39.02%. North American sales decreased by 1.3% as sales of morning foods, snacks, and "others" saw declines and only the specialty foods segment reported growth. Internationally, sales in Europe and Latin America grew 6.4% and 3.4% respectively, while sales in the Asian Pacific declined 9.6%. Overall, it was not a great quarter for Kellogg compared to 2012. It did exceed analyst estimates, however, so it can be considered a success.

Expectations & what to watch for
Fourth-quarter results for fiscal 2013 are due out before the market opens on Feb. 6. Here are the current consensus analyst estimates:

Metric Expected Year Ago
Earnings Per Share $0.82 $0.67
Revenue $3.53 billion $3.56 billion

These expectations would result in earnings per share increasing 22.4% and revenue declining 0.8% from the fourth quarter of fiscal 2012. These estimates are reasonable, but revenue expectations seem to be light; a  company with several "cash cow" brands like Kellogg can usually report a consistent stream of revenue, so I think it will be more in the range of flat to up 1%. Additionally, I think it will be important for the company to show a rise in operating profit rise and an expansion of the operating margin to make up for the declines we saw in the third quarter.

Other than the key metrics, it will be very important for the company to provide an outlook for 2014 that is within Wall Street's estimates. Currently, the expectations call for earnings per share of $3.95-$4.25 on revenue of $14.9 billion-$15.5 billion. In addition, I want to see Kellogg give a bullish outlook on the North America segment, since it makes up the majority of the company's sales. If earnings expectations can be met and guidance is within the estimates, Kellogg's stock will like see a large move to the upside since it currently sits more than 10% below its 52-week high.

Competitor's recent report
General Mills (NYSE:GIS), Kellogg's largest competitor, is the company behind some of the world's most popular brands including Betty Crocker, Pillsbury, Haagen-Dazs, Green Giant, Progresso, Yoplait, and Cheerios. It reported earnings in mid-December, which provides great insight into the industry and gives us a blueprint of what to expect from Kellogg. Here's what the company reported:

Metric Reported Expected
Earnings Per Share $0.83 $0.89
Revenue $4.88 billion $4.96 billion

Earnings per share declined 3.5% and revenue remained unchanged year-over-year, resulting in a disappointing mixed quarter. International retail was the only segment to report year-over-year sales growth, with just a 2% increase. U.S. retail sales declined 1%, and convenience store and food-service sales fell 2%. This is not a good indicator and shows continued struggles in the United States. For this reason, we must be very cautious on our approach to Kellogg's earnings and should hold off on any new investment until after the release.

The Foolish bottom line
Kellogg's is a global powerhouse with several "cash cow" brands to keep revenue consistent. The company is about to report fourth-quarter results and I believe that the current expectations are attainable. After the difficulties General Mills faced, however, I want to wait until after the report is released to initiate a position. Keep a close eye on this dividend-paying giant and consider buying on any heavy weakness.

The Motley Fool's Top Stock for 2014
There’s a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Joseph Solitro has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers