Kellogg Expected to Report a 10% Fall in Earnings for Fiscal 4Q15
Kellogg’s Revenue and Earnings Expected to Fall for Fiscal 4Q15
Declining earnings trend
Kellogg Company (K) has been in a falling earnings trend since fiscal 1Q15. It reported EPS (earnings per share) of $0.85 in fiscal 3Q15, beating analysts’ estimates by 1.1%. EPS fell 10% compared to fiscal 3Q14. Kellogg reported fiscal 3Q15 earnings of $205 million, or $0.58 per share, a decrease of 6% from the $0.62 per share reported in fiscal 3Q14. The adjusted EPS were $0.85 per share in 3Q15. The EPS figure included a negative impact of $0.11 per share from currency translation. Currency-neutral comparable EPS came in at $0.96.
Earnings estimates
Analysts estimate Kellogg’s fiscal 4Q15 EPS to come in at $0.75, a fall of 10.7% year-over-year. For fiscal 2015, they expect a decline in EPS of 8% to $3.50. Analysts are forecasting an earnings decrease this year of 8.4% over last year. Analysts expect earnings growth next year of 4.8% over this year’s estimated earnings. Analysts following the company are expecting its earnings to grow at an average annual rate of 10.0% over the next five years. The company mentioned in its outlook that it expects growth of 6%–8% in currency-neutral EPS for 2016.
What impacted Kellogg’s fiscal 3Q15 earnings?
Kellogg’s 3Q15 EPS were negatively affected by mark-to-market accounting of $0.04 per share, remeasurement of the Venezuelan business of $0.04 per share, and $0.02 per share of integration and transaction costs. In addition, the EPS figure was affected by costs of $0.18 per share associated with the Project K efficiency and effectiveness program and a gain of $0.01 per share from acquisitions.
Peers’ earnings estimates
Kellogg’s peers in the food and packaging industry include The Kraft Heinz Company (KHC), Flowers Foods (FLO), and Tyson Foods (TSN). The EPS estimates for the upcoming fiscal 4Q15 results are $0.58 for KHC and $0.22 for FLO. The estimate for TSN for its upcoming fiscal 1Q16 is $0.89.
To gain exposure to Kellogg, you can invest in the First Trust Consumer Staples AlphaDEX Fund (FXG) and the PowerShares S&P 500 High Dividend Low Volatility Portfolio (SPHD). They both invest 4.7% of their holdings in Kellogg.
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