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KELLOGG (K)
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EARNINGS PREVIEW: Consumer-Product Cos Take Steps To Defend Market Share

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04/10/2012 | 07:57pm CEST
   By Melodie Warner 
   Of  
 

TAKING THE PULSE: Consumer-product companies have struggled to defend their market share as U.S. shoppers trade down from more expensive, name-brand labels to save money, just as grocery chains become more competitive by polishing up their private labels as brands in themselves. To combat stagnant grocery sales, some packaged-food companies are increasingly turning their focus to snacks, which generally start at lower prices and offer the added value of convenience, for which shoppers are willing to pay more. Furthermore, prices for snacks can be raised more easily than those of some grocery staples.

Cereal maker Kellogg Co. (>> Kellogg Company) reached a $2.7 billion deal with Procter & Gamble Co. (PG) to buy its Pringles potato crisps, while rival General Mills Inc. (>> General Mills, Inc.) recently bought Food Should Taste Good Inc., a maker of tortilla chips in such flavors as sweet potato and chocolate. Meanwhile, Kraft Foods Inc. (>> Kraft Foods Inc) is nearing the separation of its North American grocery business from its snacks division.

To be sure, some consumer-product companies are also fighting back by rolling out more discounts and coupons while increasing their advertising budgets.

 
   COMPANIES TO WATCH: 
 
   Coca-Cola Co. (>> The Coca-Cola Company) - reports April 17 

Wall Street Expectations: Analysts polled by Thomson Reuters recently expected a profit of 88 cents a share on $10.82 billion in revenue, compared with 86 cents a share and $10.52 billion, respectively, a year earlier.

Key Issues: The beverage giant plans to plow up to $650 million in new, annual cost savings back into the marketing of its brands, which continued to grow sales and volume during the fourth quarter. Coke has said it doesn't plan to be dragged into a pricing war that could erase some of the progress it has made by raising prices, especially in markets close to home. The savings should also help mitigate increasing commodity costs that are forecast to rise up to $450 million this year after an $800 million spike in 2011.

 
   PepsiCo Inc. (>> PepsiCo, Inc.) - reports April 26 

Wall Street Expectations: Analysts forecast a profit of 67 cents a share on $12.36 billion in revenue, compared with 74 cents a share and $11.94 billion, respectively, a year earlier.

Key Issues: PepsiCo considered splitting its snack and beverage businesses, but instead decided to boost marketing and advertising by $500 million to $600 million this year, mostly in the U.S. where its flagship Pepsi-Cola drink has dropped to the No. 3 spot behind Coca-Cola and Diet Coke. Pepsi is also implementing a three-year productivity program projected to save more than $500 million this year and to reduce capital expenditures by 10% from 2011 levels. The restructuring will cause core earnings growth to fall 5% this year, but PepsiCo expects a return to long-term earnings growth in the high-single digits in 2013.

 
   Procter & Gamble Co. (PG) - reports April 27 

Wall Street Expectations: Analysts forecast a profit of 93 cents a share on $20.3 billion in revenue, compared with 96 cents a share and $20.23 billion, respectively, a year earlier.

Key Issues: P&G issued a downbeat view for its current quarter while slashing its full-year earnings projection in January due primarily to unfavorable currency rates. But P&G lost market share across a greater portion of its business lines in the past quarter than previous ones, partly because competitors had held back on raising prices. P&G has said it will rescind some of those price increases.

The company also unveiled plans to eliminate about 4,000 more jobs and cut its massive marketing budget by $1 billion as the consumer-products giant targets savings of $10 billion by 2016. The company has said cuts will come by thinning the ranks of marketing executives and spending more efficiently, such as leaning more heavily on lower-cost digital marketing.

 
   Kraft Foods Inc. (>> Kraft Foods Inc) - date to be announced 

Wall Street Expectations: Analysts forecast a profit of 56 cents a share on $13.04 billion in revenue, compared with 52 cents a share and $12.57 billion, respectively, a year earlier.

Key Issues: The packaged-food giant has forecast 2012 organic revenue growth of about 5%, including the negative impact from product pruning in North America. The company has continued to redirect cost savings into increased brand marketing and rolled out new products in recent months, helping to offset some weakness in the overall packaged-food market.

Kraft also decided its North American grocery business will keep the Kraft Foods name after the planned split off, while the global snacks business gets the new moniker Mondelez International (pronounced mohn-dah-LEEZ). Kraft explained that combining "monde" from the Latin word for world, and "delez," a so-called fanciful expression of delicious, is meant to evoke the idea of a "delicious world."

(The Thomson Reuters financial estimates and year-earlier figures may not be comparable due to one-time items and other adjustments.)

-By Melodie Warner, Dow Jones Newswires; 212-416-2283; [email protected]

Stocks mentioned in the article
ChangeLast1st jan.
COCA-COLA COMPANY (THE) 0.55% 42.41 Delayed Quote.-7.56%
GENERAL MILLS -0.12% 41.77 Delayed Quote.-29.55%
KELLOGG 0.96% 60.77 Delayed Quote.-10.61%
KRAFT FOODS INC --End-of-day quote.
PEPSICO, INC. -0.64% 118.26 End-of-day quote.13.36%
PROCTER & GAMBLE COMPANY 0.83% 74.06 Delayed Quote.-19.39%
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Financials ($)
Sales 2018 13 440 M
EBIT 2018 2 012 M
Net income 2018 1 504 M
Debt 2018 8 034 M
Yield 2018 3,63%
P/E ratio 2018 14,29
P/E ratio 2019 13,54
EV / Sales 2018 2,15x
EV / Sales 2019 2,09x
Capitalization 20 877 M
Chart KELLOGG
Duration : Period :
Kellogg Technical Analysis Chart | K | US4878361082 | 4-Traders
Technical analysis trends KELLOGG
Short TermMid-TermLong Term
TrendsNeutralBearishBearish
Income Statement Evolution
Consensus
Sell
Buy
Mean consensus HOLD
Number of Analysts 20
Average target price 69,5 $
Spread / Average Target 14%
EPS Revisions
Managers
NameTitle
Steven A. Cahillane Chairman & Chief Executive Officer
Fareed A. Khan Chief Financial Officer & Senior Vice President
Brian S. Rice Chief Information Officer & Senior Vice President
James M. M. Jenness Director
Donald R. Knauss Lead Independent Director
Sector and Competitors
1st jan.Capitalization (M$)
KELLOGG-10.61%20 877
NESTLÉ-8.19%240 797
THE KRAFT HEINZ COMPANY-26.97%70 785
MONDELEZ INTERNATIONAL-7.66%58 295
DANONE-7.25%51 531
ASSOCIATED BRITISH FOODS-2.48%29 114