Stock Watch
Kellogg Co.: Sales Are Grrrrrrreat!
Earnings are growing nicely for the founder of Frosted Flakes, and its buyout of Keebler should keep the streak going.
May 20, 2003
Marketers at Kellogg Co. (K) must be eating right. The world's top cereal maker turned in an impressive 4.2% sales gain and 7.4% profit gain in the first quarter, even in the face of higher fuel, commodity and employee benefits costs.
Kellogg produces lots of familiar breakfast fare -- everything from everything from Tony the Tiger's Frosted Flakes, Raisin Bran and Fruit Loops to Pop-Tarts, Eggo waffles and Nutri-Grain cereal bars. It even makes the vegan-friendly Morningstar Farms meatless meat products.
Kellogg really got its earnings boost from strength in its snack food division (margins on those cereal bars are surprisingly high). It also raised the cost of most of its cereal and snack products by about 3% in early 2003, which should keep future earnings on track.
Stand & Poor's Outlook newsletter spotlighted Kellogg this week, saying that it has done a good job integrating Keebler, which it bought in 2001, and the acquisition should provide a nice avenue for future growth. S&P also says shares are attractive, not necessarily for their cheapness, but for their fortifying $1.01 per share annual dividend.
-- Elizabeth Frengel
