Cereal giant Kellogg is expected to deliver healthy earnings growth, boosted by increased marketing and cost-cutting initiatives, when it unveils its fourth-quarter and full-year results tomorrow (4 February).
In a note ahead of the company’s quarterly earnings release, Morgan Stanley analysts upped the company’s full-year earnings per share outlook to US$3.24 from $3.20.
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During fiscal 2008, Kellogg reported earnings of $2.99 per share.
When Kellogg delivered its third-quarter results at the end of October, the company said that, while the economic environment had placed “significant pressure” on consumers, it had also prompted Kellogg to aggressively pursue productivity initiatives and increase its investment in marketing.
According to Morgan Stanley, Kellogg’s bottom line is expected to benefit from improved cereal sales – which have held up well during the global recession – and efforts to reduce costs under the company’s K-Lean initiative.
Likewise, analysts at Stifel Nicholas said that they expect Kellogg earnings to benefit from the group’s cost-cutting and lower cost inflation, as well as Kellogg having lapped the cost of last year’s peanut butter recall.
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By GlobalData“Cost-saving initiatives from the K-Lean program coupled with lower input cost inflation and the lapping of the peanut butter recall expense should yield nearly 400 bps of gross margin expansion in the quarter with a diminishing benefit throughout 2010,” they wrote.
Morgan Stanley, which currently rates Kellogg shares as “overweight”, said it anticipates continued EPS improvements in the coming year – with earning expected to increase to $3.63 per share, up from previous estimates of $3.62.
Stifel Nicholas said that it antisipates full-year EPS in the region of $3.62 for 2010.
