Kellogg Exceeds Q4 Expectations; Shares Pop 5%

Kellogg Company (K) delivered another robust quarter and ended the year on an optimistic note. Despite facing persistent pandemic-triggered supply chain issues, inflationary pressures, coupled with its labor strike issues, the company managed to outperform fourth-quarter expectations.

The company’s full-year fiscal 2021 results also came in-line with its guidance across all metrics. Further, a fire at Kellogg’s North America cereal manufacturing facilities also disrupted the company’s operations.

Following the news, shares of the ready-to-eat cereal and convenience food manufacturer popped more than 5.2% and ended the day up 3.1% at $63.58 on February 10.

Robust Results

Kellogg’s Q4 net sales fell 1.3% year-over-year to $3.42 billion, but came in better than analyst estimates of $3.39 billion. The fall in sales was due to foreign currency translation impact and one less shipping week compared to the same period last year.

Similarly, quarterly adjusted earnings declined 3.5% year-over-year to $0.83 per share but outpaced Street estimates of $0.80 per share.

Backed by a favorable price mix and solid demand for snacks in the emerging markets, Kellogg FY21 net sales grew 3% to $14.18 billion. Additionally, FY21-adjusted earnings grew 1.3% annually to $4.04 per share.

CEO Comments

Pleased with the quarterly performance despite the several headwinds, Chairman and CEO, Steve Cahillane, said, “We enter 2022 with growth momentum, financial flexibility from strong cash flow and balance sheet, and enhanced capabilities that will continue to enable us to manage through challenging business conditions.”

Initial FY22 Guidance

Based on the current economic environment, continued disruption from the supply chain issues, higher input costs, and residual impact from its labor strike and fire, the company initiated guidance for the full year fiscal 2022.

For FY22, Kellogg expects organic net sales to grow by 3% backed by favorable price trends, and adjusted earnings are expected to grow between 1% to 2% annually on a constant currency basis. Capital expenditures are forecasted at $600 million and cash flow is projected to be between $1.1 billion and $1.2 billion.  

Analysts’ View

Responding to Kellogg’s quarterly performance, Jefferies analyst Robert Dickerson reiterated a Hold rating on the stock with a price target of $67, implying 5.4% upside potential to current levels.   

The analyst noted that Kellogg’s current headwinds are expected to continue into 1H22, with near-term uncertainty in cereals, bars, and alternative meat.

Commenting on the conservative view of the stock, Dickerson said, “We find the long-term upside potential of the shares interesting if the return on ramped brand investment proves attractive. We remain side-lined given Kellogg’s currently in a pocket of pressure given the operating landscape + company-specific transitory issues (labor strike).”

Overall, the stock has a Hold consensus rating with 1 Buy and 6 Holds. At the time of writing, the average Kellogg price target was $67.38, which implies 5.98% upside potential to current levels. Shares have gained 12.7% over the past year.

Blogger Opinions

TipRanks data shows that financial blogger opinions are 90% Bullish on K, compared to a sector average of 71%.

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