Kellogg Third Quarter Earnings Preview

By Investopedia Staff | October 29, 2012 AAA

Shares of Kellogg (NYSE:K) have risen 10.9% since July 31, 2012 to close at $52.90 on October 26, 2012. The company is looking to keep that trend going when it releases its third quarter results on Thursday, November 1, 2012.

Investors should care about a company's quarterly earnings because it shows the state of the business over the past 90 days and provides guidance for the following 90 days. SEE: Surprising Earnings Results

What to Expect: Kellogg is expected to report 81 cents per share, up 1.3% from a year ago when the company reported earnings of 80 cents per share.

Over the past month, the consensus estimate has gone up, from 80 cents, but it is the same as it was 90 days ago. Analysts are projecting earnings of $3.31 per share for the fiscal year.

Revenue is expected to exceed last year's figure of $3.31 billion by 11.4% and come in at $3.69 billion for the quarter. Kellogg is expected to report revenue of $14.05 billion for the fiscal year.

Company Performance: Revenue has increased 2.9% on average over the past four quarters. The biggest increase was in the fourth quarter of the last fiscal year, up 5.4% from the year-earlier quarter.

K's P/E ratio of 16.1 falls below the industry average of 44.01. A low P/E ratio may indicate that the market expects relatively slower earnings growth. The P/E ratio has been used for ages by analysts and still remains one of the most relevant pieces of stock valuation. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Can Investors Trust the P/E Ratio?

Kellogg's best recent streak was when its price gained $1.25 per share between October 23, 2012 and October 26, 2012.

The Competition: Kellogg, with its subsidiaries, manufactures and markets ready-to-eat cereal and convenience foods, including cookies, crackers, and toaster pastries. Most analysts (16 of 20) give Kellogg a hold rating. In the last three months, the number of buy ratings has increased slightly.

The company's closest competitor in the food processing industry is General Mills (GIS). Analysts are less optimistic about Kellogg than about General Mills. Twelve out of 18 analysts rate the latter a buy compared to three of 20 for the former.

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