Before the market opens on Thursday, October 29, cereal producer Kellogg (NYSE: K) will release its third-quarter earnings. Analysts expect the company to earn 84 cents per share in the quarter, with revenue of $3.28 billion.
In the second quarter, Kellogg saw its profit increase 13%, which gave the cereal thriller reason to up its full-year forecast. Before the second-quarter report, Kellogg expected high single-digit-percentage growth for 2009; however, this was upped to 8% to 10% following the strong second quarter. In addition, Kellogg believes it will save $1 billion annually by the end of fiscal 2011. This money will then be reinvested into advertising, which could lead to more money for the company.
So, the future looks pretty bright for Kellogg ahead of earnings, but what can we expect following Thursday's earnings report? It sure seems that expectations are high for Kellogg, so I feel that the company needs to either match these expectations or beat them in order to maintain the positive momentum.
If the earnings do not disappoint, the stock is set to benefit from a technical standpoint. Since the middle of March, the stock has mounted a steady ascent, thanks mainly to the support of its 10-week moving average. This trendline has provided the impetus for the stock's advance, failing rarely; and when this trendline fails, the stock has quickly rebounded off its 20-week counterpart.
That is the good technical news; now for the bad news. The stock faces potential overhead resistance from the $52 level, which has acted as both support and resistance in the past. The concern should be that some believe the stock can advance as high as $56. What if Kellogg only matches expectations and then provides expected guidance for 2010? Will the stock be able to maintain the momentum it has reached and break through the $52 level? We will learn on Thursday morning.
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