Kellogg Posts Higher Profit, Boosts 2005 Outlook

Cereal maker Kellogg Co. (K) Thursday reported quarterly net earnings slightly above analysts' average estimate and boosted its profit outlook for the year, helped by cost cuts and strong sales of products like Eggo waffles.

Net income for the first quarter rose about 16 percent to $254.7 million, or 61 cents per share, from $219.8 million, or 53 cents per share, a year earlier.

Wall Street analysts, on average, had expected the maker of Frosted Flakes (search) cereal and Keebler cookies to report earnings of 60 cents per share, according to Reuters Estimates.

The company's shares rose 1.3 percent following the announcement, and J.P. Morgan analyst Pablo Zuanic said he expected the stock to react positively to the company's strong sales growth.

"Although (Kellogg) beat the consensus by only one penny, it did so through robust top-line growth," Zuanic said in a note to clients.

Sales rose 8 percent to $2.6 billion, ahead of analysts' average estimate of $2.52 billion, according to Reuters Estimates. Excluding the impact of a weaker U.S. dollar, sales were up 6 percent.

Kellogg has been spending more on promoting its products, which has helped drive sales. North American sales of its Eggo waffle (search) brand were particularly strong during the quarter, rising in the double digits.

Cereal sales in North America, Kellogg's flagship business, rose 4 percent during the quarter thanks to promotions and strong consumer demand for new products. Kellogg competes in the cereal aisle with General Mills Inc. (GIS).

Lower interest expense and taxes also boosted results during the quarter and helped offset higher employee benefit costs, Kellogg said.

Sales in Latin America, one of Kellogg's fastest-growing markets, rose 12 percent, while European sales were up 3 percent.

Battle Creek, Michigan-based Kellogg expects its full-year earnings to fall at the high end of a previously forecasted range of $2.28 per share to $2.32 per share.

The forecast includes 15 cents a share in restructuring costs for the year. Unlike other companies, Kellogg does not report such expenses as one-time events.

Wall Street analysts are expecting earnings of $2.32 per share to $2.55 per share, with an average estimate of $2.38 per share for the year, according to Reuters Estimates.

Also on Thursday, Kellogg said its board of directors boosted its dividend by 10 percent for the third quarter. The company last paid a dividend of 25.25 cents per share.

Kellogg shares gained 76 cents to close at $43.56 on the New York Stock Exchange (search).