Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Dig Into a Hearty Bowl of Profits

Watch stocks you care about

The single, easiest way to keep track of all the stocks that matter...

Your own personalized stock watchlist!

It's a 100% FREE Motley Fool service...

Click Here Now

When we last checked in with snacks-and-cereal maker Kellogg (NYSE: K  ) , quarterly results were bland. At first glance, things seem to have really turned around at the home of Tony the Tiger, although our Fool decoder ring reveals a somewhat different story.

First-quarter sales gained 5%, to $3.3 billion. Excluding favorable currency effects, sales rose 2%.

Compared to the year-ago period, volume, as measured by tonnage, inched up by 0.5%, and product price/mix contributed another 1.3% to sales growth. Tonnage showed a nice improvement from the prior quarter, but the real highlight awaited on the bottom line.

Earnings per share of $1.09 represented a 30% year-over-year jump. That far outshines the most recent quarterly EPS growth turned in by key competitor General Mills (NYSE: GIS  ) .

However, if we adjust for a lower tax rate in this year's first quarter, and a one-time loss last year, EPS growth falls to a more modest 17%. Don't get me wrong; that's still impressive, particularly because the gain came not just from lower commodity costs, but also from productivity savings.

Goings-on in the company's North American segment revealed interesting insights into the U.S. consumer, not to mention the competitive landscape among consumer-staples companies. First, the retail snacks category posted organic sales growth of 5%, which suggests that consumers are loosening their wallets for nonessential purchases.

At the same time, retail cereal eked out only a 0.5% gain in organic sales, partially because of increased competition. According to one analyst, cereal maker Ralcorp Holdings (NYSE: RAH  ) is trying to win back market share.

Also, Kellogg management reported that products are selling faster in dollar and club stores than in regular grocery channels. That obviously bodes well for the likes of Costco (NYSE: COST  ) , Dollar General (NYSE: DG  ) , and Family Dollar (NYSE: FDO  ) , all of which sell Kellogg items. But it also suggests that consumers are looking for the best possible deal, even as they once again buy "fun foods" such as cookies and other snacks.

And that, in turn, casts a shadow on future sales growth among the full range of consumer-staples names.

Fortunately, Kellogg's got a grade-A cost-savings program in full swing. Plus, management just announced a $2.5 billion three-year stock buyback program, which, at today's prices, represents more than 10% of market cap.

That should help the company achieve its long-term target of high single-digit EPS growth (excluding currency). At a forward price-to-earnings ratio of 14, shares don't represent a grr-rr-reat value, but investors who buy at today's prices should do reasonably well.

Costco is a selection of Motley Fool Inside Value and Motley Fool Stock Advisor. The Fool owns shares of Costco. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Mike Pienciak holds no financial interest in any company mentioned in this article. The Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1170243, ~/Articles/ArticleHandler.aspx, 10/24/2016 5:24:43 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,145.71 -16.64 -0.09%
S&P 500 2,141.16 -0.18 -0.01%
NASD 5,257.40 15.57 0.30%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/21/2016 4:04 PM
DG $67.93 Down -0.05 -0.07%
Dollar General CAPS Rating: ***
FDO.DL $0.00 Down +0.00 +0.00%
Family Dollar Stor… CAPS Rating: ***
GIS $60.71 Down -0.29 -0.48%
General Mills CAPS Rating: ****
K $74.34 Up +0.11 +0.15%
Kellogg's CAPS Rating: ****
RAH.DL $0.00 Down +0.00 +0.00%
Ralcorp Holdings,… CAPS Rating: ***