Kellogg (NYSE: K) reported Q1 EPS of $1.19, $0.11 better than the analyst estimate of $1.08. Revenue for the quarter came in at $3.4 billion versus the consensus estimate of $3.3 billion.

Kellogg Updates its 2018 Financial Guidance

The Company is updating its financial guidance for 2018. It is reaffirming previous guidance for its base business, and then adding to guidance for currency-neutral net sales and currency-neutral adjusted operating profit to reflect the impact of its expanded investment in its West Africa ventures, and the resultant consolidation of Multipro's results. Specifically, the Company now forecasts:

• Net Sales +3-4% on a currency-neutral basis. This reflects eight months of net sales for Multipro, which adds to the base business of Kellogg. There are no changes to the outlook for the rest of Kellogg. The October 2017 acquisition of RXBAR is still expected to contribute 1-2 percentage points of growth. This still implies an organic decline of 1-2%, of which 1 percentage point of the decline is related to the negative impact of U.S. Snacks’ DSD transition, including its list-price adjustment and rationalization of stock-keeping units (SKU). The remainder of the business is still projected to be flat to down 1%, an improvement from 2017.
• Adjusted Operating Profit +5-7% on a currency-neutral basis. The addition of Multipro for the remaining eight months contributes more than 1 percentage point of additional growth. Otherwise, there are no changes to the outlook. The acquired RXBAR is still expected to contribute 1-2 percentage points of growth, while the rest of the growth is driven by remaining Project K and ZBB savings, partially offset by an increase in Brand Building investment.
• Adjusted Earnings Per Share +9-11% on a currency-neutral basis. There is no change to the Company's guidance for adjusted EPS, whose growth should be driven by growth in adjusted operating profit and the benefit on effective tax rate of recent U.S. Tax Reform. The increased investments in Multipro and TAF should have an immaterial impact on currency-neutral adjusted EPS in 2018, as contribution to operating profit from consolidating Multipro is largely offset by increased interest expense and the combination of lower earnings from unconsolidated entities and higher deduction related to Income Attributable to NonControlling Interests.
• Cash Flow guidance. The Company continues to project cash from operating activities to increase to $1.7-1.8 billion in 2018, driven by higher net income, sustained working-capital improvement, and benefits from U.S. Tax Reform. Capital expenditure is still expected to be roughly flat at $0.5 billion. The impact of Multipro is immaterial to our Cash Flow in 2018.

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