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Kellogg’s earnings: 3 takeaways from the cereal and snack maker

Yahoo Finance Live’s Brian Sozzi breaks down 3 takeaways from Kellogg’s earnings.

Video Transcript

[MUSIC PLAYING]

- Welcome back, everyone. People are snacking more, and some companies are benefiting. Kellogg handedly beat earnings and revenue estimates, and raised its forecasts for 2022 as demand for snacking went through the roof. But Sozzi says the shortage for cereal is still real, and that's where we start Sozzi's Takes today. All right. Give us the scoop, the snack.

BRIAN SOZZI: Yeah. Kellogg, they caught my attention yesterday. I saw that stock up in a down market. Seeing that continue here today, it was just interesting to look through their quarter now. It wasn't a gangbusters quarter on the top and bottom lines. You had sales up 1% in their key North America division. Operating profits up-- down 11%. So inflation's still hitting the company, but there were a couple of good things in there. I am popping out a Kellogg's box.

- It's like the toy. That's like the secret toy that you get in the bottom of a box of cereal-- it's Sozzi.

- Open your box, you may find me. And a couple of my takeaways from Kellogg's quarter here. First, the cereal shortage is in fact real. I talked to Kellogg's CEO Steve Cahillane. Still dealing with supply shortages there. My sense was things are starting to improve. And then of course, that is good, because it's a key driver of their North American business. Next up, snacking-- like you mentioned, Brad-- is on fire here in the US, as people become more mobile.

Of course, we all heard that yesterday from the Hostess Brands CEO Andy Callahan. But also overseas. Fun fact, Pringles sales in the UK, up 12%. So there's a little bit of news you can use, and then tweet about it. And last but not least, inflation. Inflation continues to pressure this company. Cahillane, really, I think suggested to me that they're going to be taking more price increases to offset this inflation.

But again, you can't go gangbusters here on inflation because you are in a competitive market with snacks and cereal. And speaking of inflation, I put that question to friend of the show, Bill Newlands, the CEO of Constellation Brands, on if he sees peak inflation. Take a listen.

BILL NEWLANDS: It's going to be wide ranging this year. I think it depends to some degree on how much you're hedged. We're hedged a lot, and more than we normally would be, which I think will help. But it's not clear that we have hit the peak just yet. I mean, we think it's going to be high inflationary pressures throughout our fiscal year.

BRIAN SOZZI: And every food executive we've been talking to, guys, just continues to debunk this notion that was in the market-- at least up until last week, or until the Fed meeting-- that there's peak inflation. Every company we've been talking to, it seems inflation is accelerating. But again, here's my take. Last but not least here on Kellogg's. And wow, there are all their cereals. What peak inflation?

That is my take. Because I am not seeing it anywhere in these discussions with these folks. Neither are the executives.

- At the same time--

- I knew you were gonna push back.

- --you could-- No! You could see a scenario where they are hedging their bets. In other words, it is much easier for a company to say inflation is continuing, and then three months from now, saying, oh, things are better than expected, rather than saying, yes, we've reached peak, and then having to backpedal three months from now. So of course, all of them are going to say we still see inflation. It's just the safer position to have.

BRIAN SOZZI: Well, since I can't pick stocks anymore, I offer up this suggestion. If you have room in your house, start stocking up on food, because it's going to go up. And it'll go up in a big way. Twinkies, Kellogg's cereal, you name it, it's going up, baby. Going up, going way up.

- But is it going to keep going up at the same rate?

BRIAN SOZZI: Just stock up anyway. Buy 12 boxes of cereal this weekend. The price is going to go through the roof. And we're seeing it not just in cereal. Look at Under Armor. We were talking about that before, too. You cannot leave a Dick's Sporting Goods store without spending more than $100 for a pair of Under Armor shorts and a tank top to look great in the gym.

- 12 boxes of cereal. I'm noticing a trend. You're actually pushing them back to Costco here. And then with the action figures--

BRIAN SOZZI: That's my mischievous plan.

- --you're lobbying for, the Sozzi action figure inside those cereal boxes.