Kellogg Company (NYSE: K) didn't need a hearty breakfast to get its stock going today (although I'm sure it had one anyway). All it needed was a reasonably healthy earnings report. Judging by how the stock is performing, I think the company got one.
For the third quarter, Kellogg saw flat sales growth. However, take out currency effects and acquisitions, and you've got a 3% expansion rate on the top line. Well, that isn't so robust, either, but let's head to the bottom line. Earnings per share came in at 94 cents, representative of a 6% increase. Not so bad, and according to Mark Fightmaster's preview, that was a dime better than what analysts wanted to see.
The element of the release that will receive the most attention from shareholders is the section devoted to guidance. The outlook has improved, and you've got to love that. Gross margin is looking good in the short term, and fiscal years 2009 and 2010 are expected to be solid and steady.
Solid and steady is what Kellogg is all about. It's not a high-risk-capital-appreciation vehicle. It's a cash-flow-dividend-payout story. And on that front, the business seems to be doing fine. Like companies such as General Mills (NYSE: GIS) and Kraft (NYSE: KFT), Kellogg simply wants to maintain a strong relationship with the consumer by investing prudently in its total portfolio to fuel acceptable expansion in economic value from operating activities.
Shares of Kellogg were up almost 3% at the time of this writing. Volume was above average, but not excessively high, in my opinion, so I wouldn't call this a tremendous breakout. Those who already own this company should wait for a pullback to add to a position. It's not on my current agenda to trade a business like Kellogg. Those who want to buy and sell quickly should look elsewhere for better ideas.
Disclosure: I don't own any company mentioned; positions can change without notice.
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