| Snowflake Score | |
|---|---|
| Valuation | 5/6 |
| Future Growth | 2/6 |
| Past Performance | 5/6 |
| Financial Health | 3/6 |
| Dividends | 5/6 |
K Stock Overview
Kellogg Company, together with its subsidiaries, manufactures and markets snacks and convenience foods.
Kellogg Company Competitors
Price History & Performance
| Historical stock prices | |
|---|---|
| Current Share Price | US$73.04 |
| 52 Week High | US$76.99 |
| 52 Week Low | US$59.54 |
| Beta | 0.43 |
| 1 Month Change | -3.69% |
| 3 Month Change | 3.28% |
| 1 Year Change | 14.52% |
| 3 Year Change | 13.95% |
| 5 Year Change | 17.11% |
| Change since IPO | 326.51% |
Recent News & Updates
Kellogg: Remains Attractive Ahead Of Its Portfolio Transformation
Summary Kellogg’s Q2 presents issues regarding gross margin and operating margin. However, it ended with a positive outlook on Kellogg’s top line, EPS, and cash flow, which reassured its dividend safety. Kellogg’s portfolio transformation seems logical. During the second quarter, Kellogg’s management made it clear that the strike's residual impact on sales had been accounted for, and they displayed remarkable price/sales mix strength. Kellogg is trading attractively at support and trading cheaply against its peers. Kellogg Company (K) is one of the major producers of cereals and other quick-and-easy foods around the world. Inflation is a growing concern, but the Inflation Reduction Act, which seeks to lower health care and energy prices, will help Americans keep their spending in check. Additionally, the recently passed law will somehow affect Kellogg's operation, as the law includes a $4 billion fund to fight drought, which may reduce the volatility of the company's input costs. In North America, Kellogg has maintained its impressive performance with increases in both volume and price/mix, ending its Q2 2022 with strong top line growth and a positive outlook for FY 2022. K is currently trading nicely above its support and is fundamentally undervalued, making this stock a good buy. Company Overview Kellogg has been in the industry for over a decade and has played a significant role in people's quick breakfast getaways. Their products are manufactured in 21 different countries and sold all over the world. K has divided its business into four distinct geographical regions, or "operating segments." Their main bread and butter is their North America operation ($2,248 million), which represents 58% of their total revenue ($3,864 million) this quarter. Even though volume is going down because of bottlenecks and shortages, the company is still able to grow its sales thanks to its effective sales mix. Volume remained pressured in quarter two by bottlenecks and shortages, but the decline was more moderate than expected. Price elasticity did not increase as much as we had anticipated. And our North America Cereal business recovered inventory and shipments faster than expected. Source: Q2 2022 Earnings Call Transcript A brief background: The company announced that it approved a plan to separate its North American cereal and Plant-based foods businesses on June 21, 2022. The company mentioned that they are aiming for this plan to materialize by the end of 2023. On a few points of improvement in their North America cereal business, the management stated that they didn't recognize any fire or union strike impact this quarter, which affected their production for the past few quarters. In fact, they are effectively rebuilding their inventory level and have resumed commercial activity, as shown in the image below, putting the business in a better position to combat today's inflationary pressures. K: Improving Brands (Source: Q2 2022 Investors Presentation) Why does Kellogg want to spin off its North America Cereal and Plant Base Business if it is improving? Looking at the image below, we can see that Kellogg's North America's Cereal and Frozen Business seems to fluctuate compared to its Snacks business. K: North America Organic Growth Trend (Source: Company Filings. Prepared by InvestOhTrader) The company's Snacks business has shown consistent organic growth, with an impressive 18% growth in the most recent quarter, while its Cereal business shows an improving 8.3%, thanks to the effective price/mix implementation of the management. However, looking at the YTD figure provided by the management, the organic sales growth of its North America Cereal business incurred a -1.4% growth, its Frozen business a -3.0% growth, while its Snack business is the only one that has a positive growth of 11.4%. Kellogg: North America Financial Result (Source: Q2 2022 Investor Presentation) Additionally, according to management, they incurred a negative operating profit on both of their cereal and frozen businesses, as shown in the image above. This puts pressure on the overall company's operating profit. Plant Co. Looking at the image below, it appears that K's peers in the plant-based food business are also struggling to turn a profit in this market, based on their recent financial results. Plant Co.: Unprofitable Peers (Source: Data from SeekingAlpha. Prepared by InvestOhTrader. Amounts are in millions) Steakholder Foods Ltd. (NASDAQ:STKH), Beyond Meat, Inc. (NASDAQ:BYND). This leads me to the conclusion that their plan will be beneficial for the company, especially with their plan to keep 80% of its revenue-generating business as shown in the image below. Kellogg: Portfolio Transformation (Source: Kellogg's Portfolio Transition Presentation) Lastly, this might promote profit margin expansion in the long run. However, this plan is still subject to final approval by the board. Hence, looking at the current inefficiency of the company makes it one of the profitability risks to monitor. Kellogg Is a Cheaper Snack Company K: Relative Valuation (Source: Data from SeekingAlpha.com. Prepared by InvestOhTrader) The Hershey Company (NYSE:HSY), Hormel Foods Corporation (NYSE:HRL), Conagra Brands, Inc. (NYSE:CAG), J&J Snack Foods Corp. (NASDAQ:JJSF)
Kellogg: Appealing Dividend, But Only Moderately Attractive In Terms Of Risk And Reward
The Seeking Alpha Dividend Grades show strong results for Kellogg in terms of Dividend Safety, Dividend Growth, Dividend Yield and Dividend Consistency. However, the HQC Scorecard demonstrates that Kellogg is only moderately attractive in regards to risk and reward. According to the HQC Scorecard, the company is only rated as very attractive in terms of Profitability, but it's rated as very unattractive in terms of Growth. I continue to rate Kellogg as a hold; in my opinion, its valuation is not low enough to consider the stock as an attractive buying opportunity. Investment Thesis The Seeking Alpha Quant Ranking places Kellogg (K) 16th (out of 56) within the Packaged Foods and Meats Industry and 59th (out of 188) within the Consumer Staples Sector. The HQC Scorecard demonstrates that Kellogg is only moderately attractive in terms of risk and reward: Kellogg receives an overall rating of 45 out of 100 points and only in terms of Profitability is the company rated as very attractive. In the categories of Economic Moat, Financial Strength, Valuation and Expected Return, it is rated as moderately attractive; in terms of Growth, however, the company is rated as very unattractive. I rate Kellogg as a hold: the current valuation of the company is not low enough to rate it as a buy. Although Kellogg shows high profitability, its growth rate is not attractive enough at the current valuation. Kellogg's Competitive Advantages In a previous analysis on Kellogg, I took a more detailed look at the competitive advantages of the company: "Due to the high and relatively stable earnings that Kellogg generates year over year, the company is able to spend a substantial proportion of its earnings on the research and development of new products as well as in the marketing of its existing products. In 2021, Kellogg spent $134 million on research and development and $790 million on advertising. Those spendings make it more difficult for potential competitors to enter into the already highly competitive consumer goods market." Furthermore, I mentioned that Kellogg has managed to build a relatively strong brand image: "Kellogg has managed to build brands and to create a product distribution network during its more than 100 years of history as a company. Furthermore, they have been able to build economies of scale that help the company to stand out against their competitors. With Pringles, Kellogg owns a strong consumer brand that the company acquired from Procter & Gamble (NYSE:PG) back in 2012. With the brands Kellogg's and Cheez-It, the company has a number of important brands in its product portfolio that consumers have been familiar with for decades." Additionally, I explained why I think the Kellogg stock could contribute to the reduction of volatility in your investment portfolio: "I believe that the competitive advantages listed above will ensure that Kellogg will continue to be able to generate stable profits in the future. Due to the company's proven ability to generate high profits even in economically challenging times, I assume that Kellogg's stock will continue to be less volatile than the broader stock market." Overview: Kellogg Kellogg Sector Consumer Staples Industry Packaged Foods and Meats Market Cap $25.68B Employees 31,000 Revenue [TTM] $14.58B Operating Income $1.98B Revenue 3 Year [CAGR] 1.92% Revenue 5 Year [CAGR] 2.68% Gross Profit Margin 30.96% EBIT Margin 13.56% Return on Equity 35.29% Free Cash Flow Yield 5.04% Dividend Yield [FWD] 3.13% Dividend Payout Ratio 55.24% Source: Seeking Alpha Kellogg's Valuation Discounted Cash Flow [DCF]-Model In terms of valuation, I have used the DCF Model to determine the intrinsic value of Kellogg. The method calculates an intrinsic value of $69.60 for the company. The current stock price is $75.59, which results in a downside of 7.90% for Kellogg. Kellogg's Revenue Growth [FWD] Rate is 3.15%. I have made more conservative assumptions and for my DCF Model have assumed a Revenue and EBIT Growth Rate of 2% for the company over the next 5 years. Furthermore, I assume a Perpetual Growth Rate of 2%. Due to Kellogg's low growth perspectives (which is underlined by the D- rating for Growth as according to the Seeking Alpha Factor Grades), I expect the company to grow slightly below the United States' Average GDP Growth Rate of 3%. I have used its current discount rate [WACC] of 6% and Tax Rate of 24.1%. Furthermore, an EV/EBITDA Multiple of 8.7x was used, which is the company's latest twelve months EV/EBITDA. Based on the above, I calculated the following results: Market Value vs. Intrinsic Value: Market Value $75.59 Upside -7.90% Intrinsic Value $69.60 Source: The Author Relative Valuation Models Kellogg's P/E [FWD] Ratio Kellogg's P/E Ratio is 19.56, which is 17.05% above its average of the last 5 years (16.71), thus providing an additional indicator that the company is currently overvalued. Kellogg According to the Seeking Alpha Factor Grades According to Seeking Alpha's Factor Grades, Kellogg is rated with a C- in terms of Valuation. Regarding Growth, the company gets a D- rating. In terms of Profitability, Kellogg is rated with a B+. For Momentum, it gets an A and for Revisions, a B+. Source: Seeking Alpha This rating as according to the Seeking Alpha Factor Grades, strengthens my belief that the company is currently not attractive enough both in terms of Valuation and Growth to receive my buy rating. Kellogg According to the Seeking Alpha Quant Ranking The Seeking Alpha Quant Ranking puts Kellogg in 16th position (out of 56) within the Packaged Foods and Meats Industry, and 59th (out of 188) within the Consumer Staples Sector. Source: Seeking Alpha Kellogg According to the Seeking Alpha Quant Rating According to the Seeking Alpha Quant Rating, Kellogg is rated as a hold, which once again underlines my own hold rating for the company. Source: Seeking Alpha Kellogg According to the Seeking Alpha Dividend Grades According to the Seeking Alpha Dividend Grades, Kellogg is rated with a B+ in terms of Dividend Safety and an A- in terms of Dividend Growth. For Dividend Yield, the company gets a B and an A+ for Dividend Consistency. Source: Seeking Alpha Kellogg's strong results as according to the Seeking Alpha Dividend Grades, demonstrate that even if the company is not rated as attractive in terms of Valuation and Growth, its stock could still be appealing for dividend income investors seeking to reduce the volatility of their investment portfolio. Kellogg's 60M Beta of just 0.43 and 24M Beta of 0.28 backs up this theory. The High-Quality Company [HQC] Scorecard "The HQC Scorecard aims to help investors identify companies which are attractive long-term investments in terms of risk and reward." Here, you can find a detailed description of how the HQC Scorecard works. Overview of the Items on the HQC Scorecard "In the graphic below, you can find the individual items and weighting for each category of the HQC Scorecard. A score between 0 and 5 is given (with 0 being the lowest rating and 5 the highest) for each item on the Scorecard. Furthermore, you can see the conditions that must be met for each point of every rated item." Source: The Author Kellogg According to the HQC Scorecard Source: The Author According to the HQC Scorecard, Kellogg receives an overall score of 45 out of 100 points. In terms of risk and reward, this means it can be classified as moderately attractive.
Shareholder Returns
| K | US Food | US Market | |
|---|---|---|---|
| 7D | 2.8% | -1.0% | -5.2% |
| 1Y | 14.5% | 1.4% | -23.0% |
Return vs Industry: K exceeded the US Food industry which returned 1.4% over the past year.
Return vs Market: K exceeded the US Market which returned -23.1% over the past year.
Price Volatility
| K volatility | |
|---|---|
| K Average Weekly Movement | 2.2% |
| Food Industry Average Movement | 5.7% |
| Market Average Movement | 6.9% |
| 10% most volatile stocks in US Market | 15.8% |
| 10% least volatile stocks in US Market | 2.8% |
Stable Share Price: K is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 2% a week.
Volatility Over Time: K's weekly volatility (2%) has been stable over the past year.
About the Company
| Founded | Employees | CEO | Website |
|---|---|---|---|
| 1906 | 31,000 | Steve Cahillane | https://www.kelloggcompany.com |
Kellogg Company, together with its subsidiaries, manufactures and markets snacks and convenience foods. The company operates through four segments: North America, Europe, Latin America, and Asia Middle East Africa. Its principal products include crackers, crisps, savory snacks, toaster pastries, cereal bars, granola bars and bites, ready-to-eat cereals, frozen waffles, veggie foods, and noodles.
Kellogg Company Fundamentals Summary
| K fundamental statistics | |
|---|---|
| Market Cap | US$24.84b |
| Earnings (TTM) | US$1.49b |
| Revenue (TTM) | US$14.58b |
16.7x
P/E Ratio1.7x
P/S RatioIs K overvalued?
See Fair Value and valuation analysisEarnings & Revenue
| K income statement (TTM) | |
|---|---|
| Revenue | US$14.58b |
| Cost of Revenue | US$10.07b |
| Gross Profit | US$4.51b |
| Other Expenses | US$3.03b |
| Earnings | US$1.49b |
Last Reported Earnings
Jul 02, 2022
Next Earnings Date
Nov 03, 2022
| Earnings per share (EPS) | 4.38 |
| Gross Margin | 30.96% |
| Net Profit Margin | 10.21% |
| Debt/Equity Ratio | 155.3% |
How did K perform over the long term?
See historical performance and comparison