There were very mixed earnings reports this morning, but the market seems to only be listening to the good reports as the major averages opened higher today. Both Kellogg (K) and Colgate-Palmolive (CL) lowered their full year earnings estimates. This is interesting because these companies are supposed to be recession resistant, but they seem to be struggling in this environment.
Colgate-Palmolive's (CL) second-quarter earnings rose to $1.17/share from $1.07 in the year-ago period. Net sales climbed to $3.81 billion from $3.76 billion. Analysts polled were looking for $1.17/share on sales of $3.95 billion. The consumer-products company also lowered its full-year earnings estimate due to currency related losses.
Kellogg (K), the cereals giant, cut its full-year forecast after reporting second-quarter earnings that fell below analysts expectations. Kellogg said second-quarter profit fell to 79 cents a share from 92 cents a year earlier. Sales dropped to $3.06 billion from $3.23 billion. Analysts estimated profit of 94 cents a share on sales of $3.29 billion.
These were disappointing reports, but historically these companies have given investors a great return on investment. Both K and CL raise their dividend on an annual basis and historically their increase in stock price has easily beat the S&P 500. Over the past 10 year, the S&P 500 is down 21.5%; while K is up 88% and CL up 40.5%. In my opinion, these are two well run companies that have hit a little rough patch. If you have a long term perspective on stocks, this could be a good time to start building a position in these names. For the record, I do prefer K over CL. Historically its the better performer and pays a better dividend.
Kellogg (K) 49.09 -2.43(-4.72%) 52wk 45.58-56.00
Colgate-Palmolive (CL) 78.30 -5.56(-6.63%) 52wk 70.45-87.39