What Drove Kellogg Co.'s Bottom-Line Beat and Stock Price Rise?

What happened?

Shares of Kellogg Co. (NYSE: K), a leading global producer of cereal, cookies, crackers, and other packaged foods, closed Thursday up a healthy 4.3% after the company reported better-than-expected second-quarter results.

So what

Starting from the top, Kellogg's second-quarter net sales declined 2.5% year over year to $3.19 billion due to consumption softness in the U.S., and lower Pringles sales in Europe. While the top-line result was weaker year-over-year, it still checked in above analysts' consensus estimate, which called for net sales of $3.16 billion, per Thomson Reuters.

That better-than-expected revenue figure filtered down to the bottom line as well. Kellogg's net income increased modestly to $282 million, or $0.80 per share, compared to the prior year; when adjusted for one-time items the company generated earnings of $0.97 per share, which was well ahead of analysts' consensus estimate of $0.92 per share.

"Our second quarter results keep us on track to deliver on our full-year financial targets, with sequential improvement in net sales performance and continued profit-margin expansion," said Chairman and CEO John Bryant.

Now what

Kellogg's plan for the third quarter is actually more of the same: to create cost advantages and shore up its bottom-line. A primary driving force behind Q2's margin growth was its decision to stop distributing some products in the U.S. directly to stores and instead distribute them to retailers' warehouses, which lowered its costs. Originally, management predicted it would complete the switch-over during the fourth quarter, but Kellogg's was ahead of schedule, and is now distributing to only the warehouses.

As long as the company continues to invest in its brands -- as it always has -- and continues to create cost efficiencies the company has the ability to return more value to shareholders. The icing on the cake is the company's dividend, which yields 3.2% currently, and has been paid to shareholders consistently since 1925.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.