(Updated - August 2, 2018 8:15 AM EDT)

(updated to add guidance)

Kellogg (NYSE: K) reported Q2 EPS of $1.14, $0.09 better than the analyst estimate of $1.05. Revenue for the quarter came in at $3.36 billion versus the consensus estimate of $3.3 billion.

GUIDANCE:

• Raising Net Sales growth outlook to +4-5% on a currency-neutral basis. This increase, from previous guidance of +3-4%, primarily reflects stronger-than-expected organic growth in the first half. The new guidance implies full-year organic net sales to be flat to down 1%, which still includes a negative impact of 1% from U.S. Snacks’ DSD transition, including its list-price adjustment and rationalization of SKUs. Acquisitions, namely RXBAR and Multipro, are still expected to account for 4-6 percentage points of growth.
• Reaffirming guidance for adjusted Operating Profit growth of +5-7% on a currency-neutral basis. While net sales outlook is increased, the Company is holding its operating profit forecast to its existing range to reflect a prudent view toward mix trends, cost pressures, and potential increases to brand investment. Less than half of this year-on-year growth remains related to the acquisitions of RXBAR and Multipro, while the rest of the growth is driven by remaining Project K and ZBB savings, partially offset by an increase in Brand Building investment.
• Raising adjusted Earnings Per Share growth outlook to +11-13% on a currency-neutral basis. This increase in guidance, from previous guidance of 9-11%, is related to various incremental tax benefits, including the benefit related to the second quarter’s pension contribution. Specifically, the Company’s effective tax rate is now expected to be 18-19% in 2018.
• Updating Cash Flow guidance for recent pension contribution and investment in growth. In the second quarter, the Company elected to make a voluntary cash contribution to its pension plans, taking advantage of strong cash flow and the tax benefit of being able to deduct it at the pre-Tax Reform U.S. corporate rate. To reflect this $250 million pretax contribution, the Company now projects cash from operating activities to be about $1.5 billion in 2018, driven by higher net income, sustained working-capital improvement, and benefits from U.S. Tax Reform. Separately, the Company is increasing its capital expenditure for this year by almost $50 million, to about $550 million, to fund growth initiatives such as capacity for single-serve pack formats and for emerging markets.

For earnings history and earnings-related data on Kellogg (K) click here.