S&P 500 slips, but losses kept in check as Nvidia climbs ahead of results
On Tuesday, Jefferies analyst Rob Dickerson adjusted the price target for WK Kellogg (NYSE:KLG) shares, bringing it down to $16.00 from the previous $19.00, while retaining a Hold rating on the stock. According to InvestingPro data, analyst targets for KLG currently range from $14 to $27, with the stock trading at $16.89. InvestingPro analysis suggests the stock may be undervalued at current levels. The revision follows a reported decline in Kellogg’s fourth-quarter sales and volumes, which showed a decrease of approximately 5% and 9% year-over-year, respectively. This drop in performance was notably steeper than the third quarter’s 2% and 4% declines and underperformed relative to the ready-to-eat (RTE) cereal category, which saw decreases of around 2% and 4%. InvestingPro data shows the company’s revenue declined 2.51% over the last twelve months, with five analysts recently revising their earnings expectations downward.
Dickerson’s commentary highlighted the contrast between Kellogg’s quarterly results and the broader cereal market. He noted, "U.S. tracked channels suggest KLG’s Q4’24 sales/volumes fell ~5%/9% y/y, a marked acceleration from down ~2%/4% in Q3, and a material underperformance vs. the RTE cereal category down ~2%/4%." The analyst expressed concerns over Kellogg’s performance as it continues to operate as an independent entity.
Despite the downturn in tracked channels, Jefferies has modeled a less severe 3.5% sales decline for the fourth quarter, anticipating potentially better results from channels that are not tracked. Dickerson elaborated on the adjustments made to Kellogg’s financial forecasts, stating, "We take down ’24/’25/’26E EBITDA by ~2%/5%/6% on lower sales / vol deleverage." While challenges persist, InvestingPro reports a strong overall financial health score of 3.12 (GREAT), with current EBITDA at $396 million. Get access to the full KLG research report and 7 additional ProTips with an InvestingPro subscription.
The reduction in the estimated earnings before interest, taxes, depreciation, and amortization (EBITDA) for the years 2024 to 2026 reflects the analyst’s expectation of continued challenges for Kellogg in terms of sales and volume leverage. This recalibration of financial projections is in response to the latest data indicating Kellogg’s struggle to stabilize its market position amidst a competitive cereal segment.
Kellogg’s stock price target revision by Jefferies indicates a cautious outlook for the company’s near-term financial performance, as it navigates the pressures of a competitive market and aims to establish itself post its recent organizational changes.
In other recent news, WK Kellogg Co has experienced a downgrade in its stock rating from Hold to Sell by TD Cowen due to concerns about the company’s performance and future outlook. This downgrade is accompanied by a downward adjustment of the price target to $16.00 from the previous $18.00. Analysts at TD Cowen have also reduced their forecast for WK Kellogg’s fiscal year 2025 EBITDA to $289 million, slightly below the consensus estimate of $290 million. They highlighted the company’s significant market share losses in the fourth quarter and an uninspiring new product pipeline as key issues.
TD Cowen analysts also pointed out WK Kellogg’s history of tense labor relations as a potential risk, especially in relation to the company’s ongoing $500 million supply chain rationalization project. The credit agreement of WK Kellogg Co has been amended recently, extending the availability of a $250 million loan facility until June 30, 2025. This extension does not alter any other terms of the original agreement and is seen as a strategic financial move to ensure continued access to capital. The extended credit facility may support the company’s operational and strategic initiatives, although the specific uses for the loan have not been disclosed. These are the recent developments for WK Kellogg Co. (NYSE:K)
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.