By Martinne Geller
Feb 5 Kellogg Co forecast 2013 earnings that looked better than analysts expected as it continues turning around its business.
Kellogg, the maker of Corn Flakes, Keebler cookies and Eggo waffles, had several product recalls in recent years after too many job cuts had left it vulnerable to problems including food safety issues.
The company started reinvesting in operations in late 2011, and continued in 2012, also buying Pringles snacks and increasing its own new products and marketing.
"We are essentially a turnaround that is turning ... and heading in the right direction," said Chief Executive John Bryant. He said the company has "turned a corner" in improving its supply chain and that integration of Pringles and the implementation of new information technology remain "works in progress" for 2013.
Kellogg expects 2013 profit growth of 5 percent to 7 percent, translating into earnings of $3.82 to $3.91 per share, including an accounting change and currency fluctuations, but excluding costs from integrating Pringles.
Even though Kellogg earlier provided the growth range, the actual forecast is higher than analysts' average estimate of $3.69 per share, according to Thomson Reuters I/B/E/S.
The 2013 forecast is greater than the Street expected, in part, because a change in pension accounting boosted 2012 earnings.
"These guys are making headway," said Edward Jones analyst Brian Yarbrough. "If they can avoid more recalls I think they're definitely setting themselves up for a pretty good 2013."
Yarbrough said the Pringles deal was important, but noted that improving operations and execution in its core business was crucial for restoring investor confidence.
"There's been a lot of costs associated with that and a lot of questions about management and their ability to execute on the business," Yarbrough said.
In the fourth quarter, Kellogg posted a net loss of $32 million, or 9 cents per share, compared with a loss of $195 million, or 54 cents per share, a year earlier.
Due to a change in the way Kellogg accounts for pensions, it recognized a year-end charge.
Excluding the accounting change, earnings were 65 cents per share, down from 71 cents per share a year earlier.
Net sales rose 18 percent to $3.56 billion. Excluding foreign currency translation, acquisitions, divestitures and integration costs, sales rose 5 percent.
That was much better than some analysts, including Janney Capital Markets' Jonathan Feeney, expected. Feeney said volume growth of 2.6 percent was the strongest performance since March 2007.
Shares were up 1.1 percent at $58.83 in afternoon trading.