Kellogg Earnings Overshadowed by Restructuring Plan

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Kellogg Co. (NYSE: K) reported third-quarter 2013 results before markets opened Monday morning. The exchange operator posted adjusted diluted earnings per share (EPS) of $0.95 on revenues of $3.72 billion. In the same period a year ago, the company reported EPS of $0.93 on revenues of $3.72 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.89 and $3.71 billion in revenues.

The cereal and snack foods company also announced a restructuring program called “Project K.” The four-year “efficiency and effectiveness program” is expected to result in total costs of $1.2 billion to $1.4 billion. Kellogg expects to reduce its workforce by about 7% over the four years, from about 31,000 today to around 28,800.

Kellogg took a charge of $17 million in the third quarter related to the restructuring program and expects to recognize savings of $175 million to $200 million in the 2013 fiscal year. Charges in fiscal year 2014 are expected to be higher than the four-year average, and savings are expected to be lower.

The company also revised its guidance for this year. Kellogg now expects adjusted EPS at the lower end of its previously stated range of $3.75 to $3.84. The consensus estimate called for EPS of $3.77 for the year on revenues of $14.88 billion.

The company’s CEO said:

We are excited by the potential and opportunities we see for growth in the categories in which we operate. As a result, we are making the difficult decisions necessary to address structural cost-saving opportunities which will enable us to increase investment in our core markets and in opportunities for future growth.

Kellogg shares closed at $62.29 on Friday and were trading up about 1.5% in Monday’s premarket. The stock’s 52-week range $52.22 to $67.98. The consensus target price for the shares was around $64.00 before this report.

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