Fools would do well to be extra skeptical when headlines issued by company PR crow about exceeding expectations. Such is the case today with Kellogg's (NYSE:K) third-quarter earnings release. Remember, in press-release ball, the object is to hide the real info from the investor, and the first move is usually the overhyped headline.
Fortunately for those who would like to believe that some things are still wholesome, there don't appear to be any nasty surprises lurking at the bottom of the bowl. Kellogg's slim sales gain -- 4.8% without currency windfalls -- is nothing exciting, but it's in line with competitor Kraft (NYSE:KFT) and better than General Mills (NYSE:GIS). Peer and Income Investor favorite Sara Lee (NYSE:SLE) reports tomorrow.
Investors' take-home of $0.59 per share represents another slim 5% gain over the prior-year period, but taking the longer view, earnings are up 16% for the first nine months of the year. Gross margins also improved, so what's not to love?
The stock's price, for one. While a slight run-up in a spooked market this morning betrays plenty of enthusiasm for this brand, is it really warranted? The slow-moving, mature giant already trades at over 20 times free cash flow and 20 times full-year earnings estimates. Shares look fully valued, so investors -- like coupon-clipping cereal buyers -- would be smarter to seek companies with greater growth prospects, more room to run, or both.
For related Foolishness:
- Review the press-release game with a peek at Xybernaut (NASDAQ:XYBR).
- Take a look at Kraft's limbo.
- Does Kellogg really have the eye of the tiger?
Mathew Emmert finds companies with cash flow and great dividends. Take a free trial of Income Investor to see what he finds this month.
Seth Jayson is fortified every morning with caffeine and Slim Jims. At the time of publication, he had positions in no company mentioned. View his stock holdings and Fool profile here. Fool rules are here.
