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Kellogg Raises Full-Year Guidance as 2Q Earnings Rise Sharply

By Howard Smith – Updated Jul 30, 2020 at 11:39AM

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The company boosted profit margins with increased production to rebuild inventory and meet demand.

Pandemic-related stockpiling and stay-at-home behaviors helped Kellogg (K -2.60%) report a strong second quarter, with earnings per share increasing more than 21% versus the year-ago quarter. Excluding the impact of foreign currency, gains and losses due to noncore items like a restructuring program and a divestiture, and mark-to-market adjustments of its pension plan, the company reported earnings that were up 27%. 

Higher sales were driven by demand in packaged goods for at-home consumption; the company said the demand continued for longer than it had expected. The strong results from the first half of the year allowed the company to increase financial guidance for 2020. It now believes organic net sales, which exclude impacts from divestitures and currency fluctuations, will increase 5%, compared with the previous estimate of 1% to 2% growth year over year. Its currency-neutral EPS is now expected to decrease 1%, compared to the previous guidance for a decline of 3% to 4%. 

overhead view of four bowls of kids cereals

Image source: Getty Images.

The company said it would use the current strength in its business to help support brand growth in the second half of the year. CEO Steve Cahillane said, "Our first half performance puts us in the position to substantially increase our investment in the business during the second half, while still delivering more net sales, operating profit, earnings per share, and cash flow for the full year than we had originally planned."

North American organic sales grew 11% for the quarter. Organic sales also increased in Europe by 4%, and in Latin America by 14%, the company said.

Howard Smith 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.

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