Kellogg (NYSE: K), known for its popular breakfast cereals, had a profitable quarter despite the ongoing recession. Though it achieved this profitability through "operational discipline," or cost-cutting and careful watching of expenditures, the company showed the ability to continue to squeeze out profits in bad times. With the end of the recession looking within reach, though perhaps not yet fully visible, Kellogg looks to be well-positioned to take advantage of potentially better times.

IN PICTURES: World's Greatest Investors

Revenues Off, Profits Up
Kellogg's recent quarter saw revenue fall by 3% to $3.23 billion from $3.34 billion the same quarter last year, while earnings jumped to 92 cents per share from 82 cents. The international market was softer than the domestic market with sales off 13%, but Kellogg continues to be a strong player worldwide. The company sees 8% to 10% growth going forward, with earnings in the $3.23 to $3.29 range for 2009, excluding an expected 26-cent charge for cost-cutting. With Kellogg expecting $1 billion in savings by 2011 from its cost-cutting plan, things are looking good for the cereal maker.

It's Not Just Kellogg
General Mills (NYSE: GIS) has been posting healthy profits and, along with Kellogg, has raised its dividend. Though a cereal maker, General Mills is more widely diversified than Kellogg. So while General Mills is considering changing the ingredients in its iconic Wheaties cereal, even if this development turns out to be a dud like "new Coke" was years ago, the company should still have a hefty arsenal of popular products.

Ralcorp (NYSE: RAH), the jazzy acronym for the company that makes Post cereals and other food products, is another cereal and snack maker that is doing well. Further, Ralcorp has a nearly invisible recession wrinkle for success, as it manufactures many of the private label products that have captured frugal consumers' dollars. This, along with its staple products, should keep Ralcorp on track as we slowly emerge from the recession.

Other food giants, such as Kraft (NYSE: KFT), which features a predominance of snack and prepared foods, have found the recession manageable at worst and surprisingly amenable at best. The recent lowering of commodity prices, always an area of interest to food makers, has been good to Kraft and ConAgra (NYSE: CAG), another diversified food giant. Kraft and ConAgra, while not directly in the cereal business like the other three companies, still battle for shelf space in stores and consumer cupboards in homes. Both companies continue to thrive with strong brand name goods.

Some will maintain that the food business is a relative given in a recession, yet these companies have all continued to be well-managed and found ways to assertively market and continue developing. It's clear that Kellogg and the others haven't taken the consumer for granted, even during these economic down times.

Poised For The Upside
Kellogg and these other companies should emerge from the recession ready to roar with their seemingly mundane, even boring, but highly popular products such as Frosted Flakes, Cheez-its and General Mills' Cheerios still in demand. As a result, they are poised for continuing profitability and growth. Cereal and other food makers are not often thought of as growth stocks, sometimes due to difficult margins and a seemingly blunted upside. But as price increases dovetail with lower commodity prices, along with the global push these companies continue to make, Kellogg and the others may deliver that sweet one-two punch - growth and value along with very little risk. Or maybe that's a one-two-three punch.

Bottom Line
Watch the stock prices on Kellogg and the other food companies mentioned above, and you can pick up a good dividend-payer that may be part of a future growth-value stock renaissance. (For more, check out A Guide To Consumer Staples.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    Retirees: 7 Lessons from 2008 for the Next Crisis

    When the last big market crisis hit, many retirees ran to the sidelines. Next time, there are better ways to manage your portfolio.
  2. Economics

    Industries That Thrive On Recession

    Recessions are not equally hard on everyone. In fact, there are some industries that even flourish amid the adversity.
  3. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  4. Fundamental Analysis

    Is a U.S. Industrial Recession on the Horizon in 2016?

    Find out why the industrial economy may be teetering on an industrial recession and what could prevent it from going over the cliff.
  5. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  6. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  7. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  8. Fundamental Analysis

    Gloom and Doom for Global Markets in 2016?

    Learn about the volatility in global markets during the beginning of 2016. See why famous investors are saying some economies could see recessions.
  9. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  10. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
RELATED FAQS
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do interest rates increase during a recession?

    Interest rates rarely increase during a recession. Actually, the opposite tends to happen; as the economy contracts, interest ... Read Full Answer >>
  3. What are the risks of annuities in a recession?

    Annuities come in several forms, the two most common being fixed annuities and variable annuities. During a recession, variable ... Read Full Answer >>
  4. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center