* Kellogg, Hillshire both miss quarterly revenue estimates
* Kellogg stands by '13 view; Hillshire guides near high end
* Both companies cite weakness in desserts
* Kellogg, Hillshire shares fall 3 pct in afternoon trading
By Martinne Geller
May 2 Kellogg Co and Hillshire Brands
reported weaker-than-expected quarterly sales on
Thursday, as budget-conscious U.S. consumers cut back on
desserts, sending the food companies' shares lower.
Kellogg, which makes Keebler cookies, posted a quarterly
profit in line with estimates and stood by its full-year
outlook. Hillshire, which owns Sara Lee frozen cakes, reported a
better-than-expected profit and said 2013 earnings would be at
the high end of its forecast.
Still, a 21 percent gain in food sector stocks this year has
given food makers very high multiples, which demands better
performance. Investors have been enticed by the promise of
high-yield investments and hope for more deal-making following
the buyout of H.J. Heinz Co and speculation of a merger
between PepsiCo and Mondelez.
Specifically, Kellogg shares rose nearly 16 percent and
Hillshire shares rose more than 26 percent through Wednesday,
fueling expectations of strong results.
"When you go on big runs like that, you have to beat and
raise guidance," Edward Jones analyst Brian Yarbrough said,
adding that for Kellogg, "This is just a ho-hum quarter, so I
think there could be a little profit-taking."
Kellogg sales rose to $3.86 billion, but missed analysts'
average estimate of $3.94 billion, according to Thomson Reuters
Shares of Kellogg, which also makes Corn Flakes cereal and
Eggo waffles, fell 2.8 percent to $62.81 on the New York Stock
Exchange, while Hillshire, which also makes Ball Park hot dogs
and Jimmy Dean sausages, fell 3 percent to $34.49.
Hillshire, which separated last year from D.E Master
Blenders 1753 and is now seen as a potential takeover
target, reported quarterly revenue of $924 million, which was
below analysts' average estimate of $953.3 million, according to
Thomson Reuters I/B/E/S.
Kellogg said net income was $311 million, or 85 cents per
share in the first quarter, down from $351 million, or 98 cents
per share, a year earlier.
The decline in profit was largely due to the rising cost of
commodities, Kellogg said, adding that the first quarter
included most of the inflation it expects for the full year.
Excluding items including a hit from the devaluation of
Venezuela's currency, earnings were $1.02 per share, in line
with analysts' average estimate, according to Thomson Reuters
Kellogg Chief Executive John Bryant said the one business
that was softer than he would like was cookies, where
consumption fell 5.5 percent in the quarter.
For Hillshire, sales in its foodservice business declined
due to weakness in frozen bakery products.
"Consumers continued their retreat from desserts amidst
challenged household budgets," Sean Connolly, Hillshire CEO,
said on a conference call.
Slow sales of cookies and sweets could bode poorly for
Mondelez, which will report quarterly results next week.
Kellogg, the world's biggest cereal maker, said it was on
track to meet its goal for the full year, which calls for profit
growth of 5 percent to 7 percent. That would translate to
earnings of $3.82 to $3.91 per share.