What happened

Shares of Kellogg Company (NYSE:K) were sliding today after the cereal maker posted disappointing results and gave weak guidance in its fourth-quarter earnings report. That sent the stock down 5.6% on the day.

So what

The processed-food maker, which owns brands like Pringles, Eggo, and Pop-Tarts in addition to its breakfast cereals, said revenue ticked up to 4.2% to $3.32 billion, matching estimates. However, organic sales (which strip out the impact of acquisitions, divestitures, and currency exchange) fell 0.6%, showing the company is still struggling to grow its legacy brands.

Tony the Tiger stands behind a number of Kellogg cereals.

Image source: Kellogg.

Gross margin in the quarter fell 280 basis points to 34.6%, due in part to the impact of its consolidation of Nigerian distributor Multipro, and an adverse sales-mix shift from its new pack formats. That led to adjusted operating profit falling 3.2% to $433 million, or 1.1% in currency-neutral terms.

Adjusted earnings per share slipped from $0.93 to $0.91, but that topped estimates of $0.88. On currency-neutral terms, adjusted EPS was flat at $0.93.

Kellogg has struggled in recent years as packaged foods like cereals have fallen out of fashion with millennials and others. CEO Steve Cahillane said: "We still have a lot of work to do, but we have made great strides toward reshaping our portfolio toward growth." He also said: "This investment and progress will be evident again in 2019, setting us on a path for sustainable, profitable growth over time."

Now what

Looking ahead, Kellogg's guidance for 2019 pointed to a recovery, calling for currency-neutral sales to increase 3% to 4%, and organic growth to come in between 1% and 2%, which compares to an analyst consensus of 1.5%. On the bottom line, Kellogg expects adjusted EPS to fall 5% to 7%, due to a higher tax rate and a reduction in the value of pension assets. Analysts had expected EPS growth to be flat.

Like many other traditional food makers, Kellogg faces entrenched challenges, and shares hit a five-year low today. Investors can take comfort in the stock's 3.8% dividend yield, but shares are likely to underperform if the market continues to gain.

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.