Kellogg (NYSE: K) reported Q2 EPS of $1.24, $0.30 better than the analyst estimate of $0.94. Revenue for the quarter came in at $3.57 billion versus the consensus estimate of $3.3 billion.

Highlights:

• During the global COVID-19 pandemic and unprecedented operating environment, Kellogg's priorities continue to be ensuring our employees' health and safety, supplying food to the marketplace, and aiding our communities.
• The pandemic drove elevated at-home demand during the quarter, particularly for the Company's cereal and frozen foods products in developed markets, leading to higher-than-expected net sales.
• Kellogg increased production to keep up with demand and rebuild inventory, resulting in operating leverage that more than offset incremental costs, resulting in higher profit margins.
• A significant amount of investment in brands, commercial activity, and supply chain was delayed to the second half, further contributing to second-quarter profit and earnings.
• Strong cash generation enabled the Company to continue to enhance financial flexibility.
• Better-than-expected results in the second quarter prompted the Company to increase its full-year financial outlook, with investment timing weighting the year's profit and cash flow delivery to the first half.

"First, I want to acknowledge and thank our colleagues around the world, for their exceptional work, agility, and open dialogue during what have been truly unprecedented circumstances," said Steve Cahillane, Kellogg Company's Chairman and Chief Executive Officer. "Our organization has risen to the challenges of keeping each other safe, supplying much-needed food to the marketplace, and giving back to our communities in a time of need. Importantly, we improved our category share performance and delivered financial results that exceeded our expectations."

Mr. Cahillane added, "Our first half performance puts us in the position to substantially increase our investment in the business during the second half, while still delivering more net sales, operating profit, earnings per share, and cash flow for the full year than we had originally planned. This second-half investment is intended to bolster more brands in our portfolio, hone important capabilities, and enhance our competitive position, so that we emerge from this crisis even stronger."

Kellogg Raises Full-Year Financial Guidance

Kellogg Company raised its full-year financial guidance, reflecting sales and profit over-delivery in the first half of the year. The Company has made certain assumptions about the second half amidst an uncertain environment. Notably, the Company assumes at-home consumption growth will moderate to normalized levels by the fourth quarter, with away-from-home demand taking longer to recover, and emerging markets feeling the impact of slowing economies. In addition, the Company expects to sustain direct costs around safety, sanitation, and labor, and has shifted substantial brand investment into the second half.

Specifically, based on these assumptions, the Company's revised guidance ranges are:

• Organic net sales growth is now expected to finish 2020 at approximately 5% year on year, up from previous guidance of +1-2%.
• Currency-neutral adjusted operating profit growth is now projected to finish 2020 at a decline of approximately (1)% year on year, an improvement from previous guidance of (4)%, and still weighed down by the absence of businesses divested in July, 2019.
• Currency-neutral adjusted earnings per share for the full year is now estimated to decrease by approximately (1)% year on year, from previous guidance of (3)-(4)%, and still weighed down by the absence of businesses divested in July, 2019.
• Net cash provided by operating activities is now expected to finish 2020 at $1.6 billion, the high end of the previous guidance range of $1.5-1.6 billion, with capital expenditure of approximately $0.6 billion. As a result, cash flow is now expected to finish 2020 at approximately $1 billion, the high end of the previous guidance range of $0.9-1.0 billion.

Excluded from this guidance are any significant supply chain or other market disruptions related to the pandemic or global economy.

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