Earnings Preview: Kellogg Co.

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BATTLE CREEK, Mich. -Cereal and snack maker Kellogg Co. is scheduled to report earnings for the third quarter on Thursday before the market opens. The following is a summary of key developments and analyst opinion related to the period.

OVERVIEW: Kellogg, which is based in Battle Creek, Mich., and makes products like Pop-Tarts, Cheez-It crackers and Rice Krispies cereal, will likely see the strength of its brand continue to carry the company through the year.

Despite the recession, consumers have remained true to the company's brand-name products, particularly in North America where cereal sales have been strong. That strength, along with stabilizing commodity prices, helped Kellogg increase its profit 13 percent in the second-quarter and prompted the company to raise its full-year guidance.

Kellogg now expects its earnings per share to grow 8 percent to 10 percent in 2009, sharpening its earlier forecast of high single-digit growth.

The food maker, like many companies, is also seeing the benefit to its bottom line from cost cuts. Kellogg says it is on track to save $1 billion annually by the end of 2011.

Kellogg has said it will reinvest some of those savings in advertising in the near term, which it hopes will propel further growth.

BY THE NUMBERS: Analysts polled by Thomson Reuters expect the company to earn 84 cents per share for the quarter on revenue of $3.28 billion. Analyst estimates typically exclude one-time items.

ANALYST TAKE: Deutsche Bank recently reiterated a "buy" rating on Kellogg's shares, saying the company is well-positioned in its industry both by products and geographical reach to excel and is helped by a strong balance sheet.

UBS analyst David Palmer said Kellogg may provide surprise earnings growth in 2010 with costs still coming down, productivity increasing and market potential for increases in volume of sales.

Palmer increased a 12-month price target to $56 to $51 and anticipates the company will provide initial guidance for 2010 this week.

WHAT'S AHEAD: Kellogg recently authorized the repurchase of up to $650 million of common stock during 2010. That's in addition to any of the $650 million share repurchase authorization that remains unused by the end of the 2009 fiscal year, which the company plans to rollover into 2010.

STOCK PERFORMANCE: Kellogg's shares rose 3.9 percent during the quarter and nearly 6 percent in the past 52-weeks.

2009-10-27 17:23:18