Shares of Kellogg Company (NYSE: K) were down on Thursday after the cereal giant delivered mixed results for the second quarter of 2023. The company also raised its outlook for the full year of 2023. Here are the key takeaways from the earnings report:
Mixed results
Kellogg’s net sales rose nearly 5% year-over-year to $4 billion in Q2 2023 but fell short of analysts’ expectations. Organic sales growth was 7%. GAAP net income was $357 million, or $1.03 per share. Adjusted EPS rose 6% to $1.25, surpassing projections.
Business performance
During the second quarter, Kellogg’s top line benefited from price realization and overall strength in its snacks business. Gross margins began to recover sooner than expected helped by productivity and revenue growth management initiatives as well as improvements in supply and service levels. This top line momentum and margin recovery helped drive a 23% growth in operating profit.
In Q2, Kellogg witnessed sales increases across all its segments except for Asia Pacific, Middle East and Africa (AMEA). On an organic basis, sales grew across all divisions. Net sales in North America grew 3% on a reported basis and 4% on an organic basis.
Europe saw sales growth of 12% on a reported basis and 11% on an organic basis. In Latin America, sales grew 17% on a reported basis and 9% on an organic basis. In AMEA, sales fell 3% on a reported basis due to adverse currency translation but on an organic basis, it grew 14%.
Guidance hike
Kellogg raised its guidance for the full year of 2023 based on its strong results. The company now expects organic sales to grow approx. 7% compared to its prior expectation of 6-7% growth. Adjusted operating profit is expected to grow 9-10% on a currency-neutral basis versus the previous range of 8-10%. Adjusted EPS is now expected to decline 1-2% on a currency-neutral basis instead of 1-3%.