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K

KELLANOVA (K)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 missed Wall Street consensus on both revenue and EPS: revenue $3.083B vs $3.160B consensus* and adjusted EPS $0.90 vs $1.01 consensus*; reported diluted EPS was $0.87 .
  • Organic growth was positive (+0.7%) despite broad category softness in developed markets and significant FX headwinds; emerging markets (notably AMEA noodles/Africa) led growth .
  • Profitability mixed: reported operating profit rose 9% YoY (lapping network optimization charges), but adjusted operating profit fell 13% YoY; reported gross margin improved YoY to 34.3% while adjusted operating margin was 14.3% .
  • No forward-looking guidance (pending Mars acquisition); management reiterated deal status and focus on execution amid macro/category softness, a key stock narrative alongside estimate shortfalls this quarter .

What Went Well and What Went Wrong

  • What Went Well

    • Emerging markets momentum: AMEA organic net sales +16.9% YoY; local-currency growth offsetting FX in Nigeria .
    • Europe profitability inflected on a reported basis: reported operating profit +227% YoY, largely lapping prior-year network optimization charges (adj. OP -1% YoY; currency-neutral flat) .
    • Management execution amid uncertainty: “We delivered against our budget in the quarter… encouraged by improvement in category share performance...” — Steve Cahillane, Chairman & CEO .

  • What Went Wrong

    • Estimate shortfalls: revenue $3.083B vs $3.160B consensus*; adjusted EPS $0.90 vs $1.01 consensus* .
    • Developed-market demand softness persisted: North America reported and organic net sales -4% as snacks and frozen categories softened; adjusted OP down 18% .
    • Latin America under pressure: reported net sales -15% (significantly negative FX) and reported OP -32% YoY despite price realization; currency-neutral adj. OP +7% .

Financial Results

Headline Financials vs Prior Periods and Consensus

MetricQ3 2024Q4 2024Q1 2025Q1 2025 Consensus*
Revenue ($B)$3.233 $3.124 $3.083 $3.160*
Reported Diluted EPS ($)$1.05 $1.04 $0.87 $1.01*
Adjusted Diluted EPS ($)$0.91 $0.92 $0.90 $1.01*
Gross Margin (Reported, %)36.4% 37.7% 34.3% —
Operating Margin (Adjusted, %)13.6% 14.4% 14.3% —

Note: Consensus values marked with * are S&P Global Market Intelligence (Capital IQ) aggregates. Values retrieved from S&P Global.

Segment Performance – Net Sales and Operating Profit (Q1)

SegmentNet Sales ($M) Q1 2024Net Sales ($M) Q1 2025Reported YoY %Reported OP ($M) Q1 2024Reported OP ($M) Q1 2025
North America$1,688 $1,619 (4.1)% $335 $305
Europe$599 $579 (3.4)% $28 $90
Latin America$314 $266 (15.2)% $27 $19
AMEA$600 $620 3.3% $75 $74
Corporate———$(72) $(58)
Total$3,200 $3,083 (3.6)% $393 $430

KPIs and Balance Sheet Highlights

KPIPrior PeriodCurrent Period
Operating Cash Flow YTD ($M)$364 (Q1 2024) $116 (Q1 2025)
Capital Expenditure YTD ($M)$155 (Q1 2024) $176 (Q1 2025)
Free Cash Flow YTD ($M)$209 (Q1 2024) $(60) (Q1 2025)
Net Debt ($M)$5,049 (Dec 28, 2024) $5,287 (Mar 29, 2025)
Reported Gross Margin (%)32.2% (Q1 2024) 34.3% (Q1 2025)
Adjusted Operating Margin (%)15.9% (Q1 2024) 14.3% (Q1 2025)

Non-GAAP bridge (EPS): Reported EPS $0.87 with adjustments (mark-to-market +$0.01; separation -$0.02; network optimization -$0.02; proposed merger costs -$0.02; tax +$0.01) to adjusted EPS $0.90; currency-neutral adjusted EPS $0.93 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue, EPS, Margins, FCFFY 2025No guidance due to pending Mars transaction (Q4 2024 and prior) No guidance (Q1 2025) Maintained
Dividend per shareQ2 2025$0.57 declared (Feb 21, 2025) $0.57 declared (Apr 25, 2025) Maintained

Note: Company reiterated it will not provide forward-looking guidance while the Mars acquisition is pending .

Earnings Call Themes & Trends

Note: A Q1 2025 earnings call transcript was not available in the document set; themes reflect company filings and press releases.

TopicPrevious Mentions (Q3 2024)Previous Mentions (Q4 2024)Current Period (Q1 2025)Trend
AI/Technology initiativesNot emphasized in Q3 materials Not emphasized in Q4 materials Dedicated AI press release detailing Copilot deployment, digital twins in manufacturing, data platform “Kortex” Increasing focus
Supply chain/network optimizationUp-front charges; ongoing optimization Up-front charges; margin improvement Lapping prior-year charges aided OP; smaller charges in Q1 Charges moderating; productivity focus
Tariffs/Macro/FXSignificant FX headwinds (Egypt/AMEA), demand softness Adverse currency translation Negative FX translation; category softness in developed markets Persistent headwind
Product/category performanceSnacks soft in AMEA; emerging markets volume/pricing Emerging markets strong; developed markets gradual improvement Developed market snacks/frozen soft; noodles/Africa strong Mixed: EM strength vs DM softness
Regional trendsNA slight growth; Europe organic +4%; AMEA organic +22% NA OP +28%; AMEA organic +36% NA -4% sales; Europe OP boosted by lapping; LatAm FX drag; AMEA organic +17% Divergent by region
Regulatory/legalMars acquisition pending; shareholder vote Expected 1H’25 close Still pending; expected 1H’25 close reiterated Unchanged pending approvals

Management Commentary

  • Strategic posture: “We delivered against our budget in the quarter, led by our emerging markets… planning contingencies and taking action for managing through continued global economic uncertainty, even as we prepare for our next chapter as part of a global snacking powerhouse with Mars.” — Steve Cahillane, Chairman & CEO .
  • Financial framing: Company highlighted organic growth (+0.7%) despite FX and category softness; reported OP +9% YoY on lapping network optimization, while adjusted OP -13% YoY; lower effective tax rate supported reported EPS growth .

Q&A Highlights

  • A full Q1 2025 earnings call transcript was not available in the document corpus; therefore, Q&A themes and specific management responses could not be reviewed. We searched for “earnings-call-transcript” in-source and externally but found none for the period [ListDocuments results: none] .

Estimates Context

MetricQ1 2025 Consensus*ActualOutcome
Revenue$3.160B*$3.083B Miss
Primary/Adjusted EPS$1.01*Adjusted $0.90; Reported $0.87 Miss

Additional context: EPS consensus based on 15 estimates; revenue consensus based on 12 estimates*.

Note: Consensus values marked with * are S&P Global Market Intelligence (Capital IQ) aggregates. Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term: Both top- and bottom-line misses vs consensus underscore persistent developed-market demand softness and FX drag; expect estimate recalibration and focus on EM resilience and cost control .
  • Profit quality: Reported EPS benefited from lower tax rate and lapping charges; adjusted profitability declined (adj. OP -13% YoY), highlighting underlying margin pressure ex one-timers .
  • Cash dynamics: YTD free cash flow was negative $(60)M on higher capex timing and pension contributions—watch cash conversion trajectory as year progresses .
  • Regional divergence: AMEA remains growth engine (organic +16.9%); Europe shows reported OP rebound via lapping; LatAm remains FX-sensitive, and NA categories remain soft—portfolio skew matters .
  • No guidance until deal closes: With guidance suspended pending Mars acquisition, narrative catalysts are regulatory milestones, category demand inflection, and execution on productivity/price-pack architecture .
  • Structural tech/digital push: AI and digital initiatives (Copilot, data/analytics platform, digital twins) suggest medium-term efficiency and speed-to-market levers beyond near-term macro/category headwinds .

Appendix: Prior Two Quarters Reference

  • Q4 2024: Revenue $3.124B; reported EPS $1.04; adjusted EPS $0.92; strong OP/EPS growth with margin improvement; no guidance due to pending deal .
  • Q3 2024: Revenue $3.233B; reported EPS $1.05; adjusted EPS $0.91; organic growth above algorithm; FX headwinds; network optimization and merger-related items present; no guidance .

Sources: Kellanova Q1 2025 8-K press release and exhibits ; Q1 2025 “published results” press note ; Dividend press releases ; Q4 2024 8-K ; Q3 2024 8-K ; AI initiatives press release (May 19, 2025) .

Consensus estimates: S&P Global Market Intelligence (Capital IQ) via GetEstimates (EPS mean 1.009; Revenue mean $3.160B; 15 EPS and 12 revenue estimates). Values retrieved from S&P Global.