Kellanova (NYSE:K) Analysts Just Trimmed Their Revenue Forecasts By 15%

The latest analyst coverage could presage a bad day for Kellanova (NYSE:K), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

After the downgrade, the consensus from Kellanova's five analysts is for revenues of US$14b in 2023, which would reflect a considerable 14% decline in sales compared to the last year of performance. Per-share earnings are expected to surge 42% to US$3.59. Prior to this update, the analysts had been forecasting revenues of US$16b and earnings per share (EPS) of US$3.69 in 2023. Indeed, we can see that analyst sentiment has declined measurably after the new consensus came out, with a measurable cut to revenue estimates and a small dip in EPS estimates to boot.

See our latest analysis for Kellanova

The consensus price target fell 5.4% to US$67.49, with the weaker earnings outlook clearly leading analyst valuation estimates.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. These estimates imply that sales are expected to slow, with a forecast annualised revenue decline of 26% by the end of 2023. This indicates a significant reduction from annual growth of 3.1% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 2.6% annually for the foreseeable future. It's pretty clear that Kellanova's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately analysts also downgraded their revenue estimates, and industry data suggests that Kellanova's revenues are expected to grow slower than the wider market. The consensus price target fell measurably, with analysts seemingly not reassured by recent business developments, leading to a lower estimate of Kellanova's future valuation. Given the stark change in sentiment, we'd understand if investors became more cautious on Kellanova after today.

A high debt burden combined with a downgrade of this magnitude always gives us some reason for concern, especially if these forecasts are just the first sign of a business downturn. See why we're concerned about Kellanova's balance sheet by visiting our risks dashboard for free on our platform here.

Another thing to consider is whether management and directors have been buying or selling stock recently. We provide an overview of all open market stock trades for the last twelve months on our platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.