The fourth-quarter results of Kellogg Company (NYSE:K) were very good. Both the top and bottom lines beat the Consensus Estimate. Year over year, both net sales and earnings went up. Net sales went up because of how the company handled revenue growth, how well snacks and emerging markets did, and how the cereal business in North America kept getting better. Kellogg’s stock rose 1.5% premarket following the results.

Detail of the Quarter

Kellogg’s adjusted earnings per share were 94 cents, which was better than the Consensus Estimate of 84 cents and our estimate of 77 cents. The bottom line went up by 13.3% from one year to the next. Adjusted earnings per share (EPS) rose by 16.9% to 97 cents per share when measured in constant currency (cc).

The company’s net sales were $3.832 billion, which was more than the Consensus Estimate of $3.658 billion and our estimate of $3.586.9 billion. The top line went up by 12% from the year before.

Net sales went up because the price/mix was good in every region and snacks and emerging markets kept going strong. The upside was helped by the fact that the fire and strike in North American cereal from the same time last year did not happen again. Price elasticity and bad exchange rates have less of an effect because of these things. Organic net sales went up 16%, excluding the effects of currency.

Adjusted operating profit went up 16%, while at cc, it went up 20%.

Segment Discussion

The North American segment had sales of $2,262 million, which is 14.4% more than the same time last year. Some of the reasons for the increase in sales are double-digit growth in price/mix and momentum in snacks. Net sales grew by 15% on their own.

Due to changes in currency, the European segment’s total sales were $561 million, which was 1.4% less than the same time last year. This was mostly made up for by good price/mix and steady growth in snacks. Organic net sales jumped 8.3%.

Latin America made a total of $296 million in sales, which is a 21.7% increase from the previous year. This was due to a strong price/mix, growth in snacks and cereal, and favorable exchange rates. The rise in organic sales was 19.1%.

Asia, the Middle East, and Africa made $717 million in sales, which is a 13.4% increase from the previous year. A good price/mix was the reason for the rise. Unfavorable exchange rates for foreign currencies were a worry. The growth in organic sales was 26.5%.

Other Financials

At the end of the quarter, Kellogg had $299 million in cash and cash equivalents, $5,317 million in long-term debt, and $4,374 million in total equity. For the year ending Dec. 31, 2022, the company made $1,651 million in cash from its operations.

In 2023, operating activities are likely to bring in between $1.7 billion and $1.8 billion in net cash, and cash flow is likely to be between $1 billion and $1.1 billion.

2023 Guidance

Organic net sales are expected to go up by 5-7% in 2023, thanks to price/mix growth and steady growth in snacks and emerging markets.

At cc, the adjusted operating profit is expected to go up by 7% to 9%, and margins are expected to level off as cost inflation continues. At cc, management thinks that the adjusted EPS will go down by 2-4%.

Kellogg stock has dropped 5.4% in the last three months, while the industry as a whole has dropped 1.3%.

Featured Image: Unsplash @ Haithem Ferdi

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