Opinions
Jennifer Radman
Kellog
K-N
COMMENT
Feb 19, 2016
Stock price when the opinion was issued
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Plunged 29% this past week. Packaged food stocks have been hammered in this market. Cereal is not a growth business, but snacks are. Before the recent spin off, K saw 80% of sales from snacks like Pringles. So Kellogg's spun off cereals into a separate company. From 2019-22, snacks saw nearly 9% annual organic compound revenue growth (vs. cereal below 1%). But snacking has slowed. K forecasts only 3% revenue growth full year, much lower than 12 months ago. Then, these new weight-loss drugs will likely reduce craving for snacks. The street fears cash-flow problems and predicts more borrowing. So, he prefers Kellanova for its snacks over KLG (cereals), but wouldn't buy either.
Premium contentDriven by the legacy of our innovative founder, w.k. kellogg, the kellogg company is the world’s leading producer of cereal, and a leader in cookies, crackers, and savory snacks production. every day, our well-loved brands, delight families in more than 180 countries. with annual sales of more than $14 billion, our brands include cheez-it®, coco pops®, corn flakes®, eggo®, frosted flakes®, keebler®, kellogg’s®, mini-wheats®, pop-tarts®, pringles®, rice krispies®, special k®, and many more. Social media mentions are up 300% in the past 24h.
The only things working this year is everything that is defensive. On the back of that, this company has seen some nice price movement. 50% of their revenue comes from cereals, so the whole trend of people trying to get away from carbs isn’t really helpful to them. A good quality company. She doesn’t see a ton of upside.