Did Kellogg Company’s Fiscal 4Q15 Earnings Beat Estimates?

Why Kellogg’s Stock Rose 4% after Fiscal 4Q15 Earnings

(Continued from Prior Part)

Earnings beat estimates by 5%

The Kellogg Company (K) reported EPS (earnings per share) of $0.79 in fiscal 4Q15, beating analysts’ estimates by 5.3%. However, EPS fell 7% year-over-year. The EPS figure included a $0.06 impact from currency headwinds. The company’s fiscal 2015 net earnings were $614 million, or $1.72 per share. Its adjusted fiscal 2015 EPS were $3.53 per share, a decrease of 7.3% from fiscal 2014’s adjusted EPS of $3.81. Foreign currency had a negative impact of $0.28 per share in fiscal 2015. As a result, the EPS figure was lowered by $0.28. Including this impact, the currency-neutral adjusted EPS were $3.81, in line with fiscal 2014’s EPS.

Analysts following Kellogg are expecting its earnings to grow at an average annual rate of 9.5% over the next five years. This year, analysts are forecasting an earnings decrease of 8.4% from last year’s earnings. Analysts expect earnings growth next year of 4.7% over this year’s forecast earnings.

Fiscal 2016 EPS guidance

The company reaffirmed previous guidance for currency-neutral adjusted EPS in fiscal 2016. The company expects 6%–8% growth in currency-neutral adjusted EPS and a currency translation impact of $0.10 per share. This includes ~$0.04 for the translation of Venezuelan results affecting the first half of 2016.

The integration costs of the company’s transactions in Egypt and Nigeria in 2015 are estimated to be between $0.02 and $0.03 per share in fiscal 2016. Also, incremental savings from Project K are projected to be ~$100 million for fiscal 2016.

The EPS guidance excludes the impact of the following items:

• mark-to-market adjustments

• integration costs

• costs related to Project K

• foreign-currency translation

• remeasurement of the Venezuelan business

• other items that could affect comparability

However, the guidance includes the impact of acquisitions and dispositions. The company also approved a $1.5 billion share repurchase program that will run through 2016 and 2017. It expects to repurchase ~$700 million–$750 million of shares in 2016.

Peers’ earnings

The company’s competitors in the industry include Hormel Foods (HRL), Flowers Foods (FLO), and Mead Johnson Nutrition Company (MJN). They reported EPS of $0.35, $0.21, and $0.67, respectively, in their last quarter. 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 4.6% of their holdings in Kellogg.

In the next part of this series, we’ll take a look at Kellogg’s revenue in fiscal 4Q15.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Why Kellogg’s Stock Rose 4% after Fiscal 4Q15 Earnings

• Part 3 - Did Kellogg Company’s Revenue Drop as Expected in Fiscal 4Q15?

• Part 4 - What Does Kellogg Project for Fiscal 2016?