Update on earnings Kellogg BskyB and RBS

Earnings season continues and a variety of companies have taken centre stage this week. While some basked in positive reaction on the back of decent numbers, others haven’t fared as well.

Here’s one name whose update seemingly disappointed the market this week.

Shares of Kellogg dipped yesterday (1^st May) following the release of the company’s first quarter results.

Kellogg reported revenue of $3.7bn for the period, representing around a 3% decline over the same period last year. Operating profit, however, increased some 22% to $614m, that’s predominantly thanks to lower costs.

The sales decline was partly down to weak demand in its cereal businesses in developed markets, particularly in the US, as consumers turn to other forms of breakfast. Competition, of course, also plays a role.

Current challenges are likely to put pressure on the company in the interim but Kellogg is taking necessary steps towards reviving long-term growth and it certainly has the resources to commit to its plans. By the way, recurring talk of Kellogg as a potential takeover target won’t hurt shares.

Some names that received a cheer…

Shares of British Sky Broadcasting Group (BskyB) soared following its third quarter update, having reported revenue of around £5.7bn (up from £5.3bn) for the nine months ended 31^st March.

BskyB boasted 74,000 new TV customers in the period (versus last year’s figure of 30,000), though broadband additions came in at 70,000 – down from last year’s addition of 152,000.

Operating profit, however, came in at £910m, an 8.5% decline from the prior year’s £944m. An increase in investments; including the cost of winning new sports rights deals, is predominantly the reason for the decline.

Fierce competition (from BT and Virgin Media, for example) meant that the market had perhaps expected worse. Of course, the competition hasn’t gone anywhere and likely further investments to combat said competitions won’t help the company’s profits, at least in the near term.

Shares of Royal Bank of Scotland (RBS) jumped on the back of its latest market update.

The company reported a £1.2bn net profit for the quarter, compared to £390m in the same period last year, and a loss of £8.7bn in the fourth quarter of last year.

Overall revenue was down some 2% at around £5bn as the company continues to reduce investment banking activity.

The increase in profit was in part helped by one-off gains, improving cost control, as well as the absence of any additional PPI charges (some £460m was charged in the fourth quarter of last year, adding to a cumulative charge of £3.1bn).

The fact that the company’s making progress is clear – its numbers were certainly better than expected – but RBS’ challenges are by no means over and the current euphoria surrounding the company is likely to soon subside.