Kellogg Company Earnings: Falling Revenue Strains Margins, Profit Drops

S&P 500 (NYSE:SPY) component Kellogg Company (NYSE:K) reported its results for the first quarter. Kellogg, with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience foods, including cookies, crackers, and toaster pastries.

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Kellogg Company Earnings Cheat Sheet for the First Quarter

Results: Net income for the food-miscellaneous/diversified fell to $358 million ($1 per share) vs. $365 million ($1 per share) a year earlier. This is a decline of 1.9% from the year-earlier quarter.

Revenue: Fell 1.3% to $3.44 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: Kellogg Company beat the mean analyst estimate of 99 cents per share. It fell short of the average revenue estimate of $3.6 billion.

Quoting Management: “While results in the first quarter were lower than we had planned due to weakness in Europe and certain other businesses, we are confident that we are taking the right actions and investing in the right places,” said John Bryant, Kellogg Company’s president and chief executive officer.

Key Stats:

Gross margins fell 0.9 percentage point to 39.9%. The contraction appeared to be driven by falling revenue, as the figure fell 1.3% from the year earlier while costs rose 0.2%.

A year-over-year revenue decrease last quarter breaks a four-quarter streak of revenue increases. The best quarter in that span was the second quarter of the last fiscal year, which saw revenue rise 10.6%.

The company has now beaten estimates the last two quarters. In the fourth quarter of the last fiscal year, it topped expectations with net income of 64 cents versus a mean estimate of net income of 63 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from 93 cents a share to 90 cents over the last ninety days. The average estimate for the fiscal year is $3.36 per share, down from $3.53 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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