Kellanova (K) Stock Up on Former Kellogg's Q3 Earnings Beat
Kellanova K delivered third-quarter 2023 results for the company that formerly operated as Kellogg Company. Management offered its financial guidance for the fourth quarter of 2023, which will mark the company’s first operating period as Kellanova. Shares of K were up more than 3% in the pre-market trading session on Nov 8.
Incidentally, Kellogg was split into Kellanova and WK Kellogg Co. on Oct 2, 2023. Kellanova’s portfolio is more focused on snacks and emerging markets, including differentiated brands with a robust scope for expansion. It flaunts a portfolio of renowned snacking brands like Pringles, Pop-Tarts, Cheez-It, Rice Krispies Treats, RXBAR, MorningStar Farms and Eggo, among others. It also houses some international cereal brands, such as Kellogg's, Frosties, Special K, Zucaritas, Crunchy Nut, Corn Flakes, Nutri-Grain and others.
Although the company’s corporate name has altered to Kellanova, its products around the globe will continue to have the Kellogg's brand.
Quarter in Detail
Kellanova reported adjusted earnings of $1.03 per share, which increased 2% year over year. On a currency-neutral basis, adjusted earnings per share (EPS) decreased 2% to 99 cents per share. However, the bottom line surpassed the Zacks Consensus Estimate of 91 cents.
Kellanova Price, Consensus and EPS Surprise
Kellanova price-consensus-eps-surprise-chart | Kellanova Quote
The company recorded net sales of $3,939 million, missing the Zacks Consensus Estimate of $4,024 million. The top line was almost flat year over year. The favorable price/mix was offset by the impact of price elasticity, unfavorable currency movements and the divestiture of the company’s Russia business (in July). Organic net sales (excluding currency and divestiture impacts) increased 3.9%.
Kellanova’s adjusted operating profit increased 11% to $498 million while increasing 10.3% to $495 million on a currency-neutral basis.
Segment Discussion
Sales in the North America segment amounted to $2,329 million, down 0.4% year over year. The favorable price/mix undertaken to counter input cost inflation was offset by the impact of price elasticity and the lapping of inventory replenishment from the year-ago quarter’s levels. Net sales declined 0.3% on an organic basis.
Revenues from the Europe segment totaled $616 million, up 9.5% year over year on the favorable price/mix, which countered the impacts of price elasticity and the divestiture of the Russia business. Organic net sales increased 8.2%.
Revenues in Latin America totaled $338 million, up 19.2% year over year, backed by a solid price/mix and favorable foreign currency rates, partly negated by increasing price elasticities. Organic sales ascended 7.9%.
Revenues in the Asia Pacific and the Middle East & Africa segment totaled $657 million, down 14.3% year over year. Unfavorable foreign currency rates caused the downside. However, the favorable price/mix was a breather. Organic sales increased 12.1%.
Other Financials
The company ended the reported quarter with cash and cash equivalents of $1,099 million, long-term debt of $5,530 million and total equity of $4,277 million. Kellanova generated net cash from operating activities of $1,400 million for the year-to-date period. Free cash flow was $894 million in the first nine months of 2023.
Q4 Guidance
Kellanova provided its view for the fourth quarter, wherein it anticipates net sales to be nearly $3.1 billion. This guidance still assumes growing elasticities and the lapping of last year’s considerable price rises, somewhat offset by the return to full commercial activity.
The adjusted operating profit is expected to be $380-$390 million. Finally, K envisions adjusted EPS to come in the band of 73-76 cents.
This Zacks Rank #5 (Strong Sell) stock has dropped 21.3% in the past six months compared with the industry’s decline of 45.7%.
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The Zacks Consensus Estimate for Lamb Weston’s current financial-year sales and earnings suggests growth of 28.3% and 24.8%, respectively, from the year-ago reported numbers.
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The Zacks Consensus Estimate for Flowers Foods’ current fiscal-year sales suggests growth of 6.7% from the corresponding year-ago reported figure.
Celsius Holdings CELH, a functional drink and liquid supplement company, currently carries a Zacks Rank #2. CELH delivered a positive earnings surprise in the preceding three quarters.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal-year sales suggests growth of 89.9% from the corresponding year-ago reported figure.
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