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On Tuesday, Jefferies analyst Rob Dickerson revised the price target for WK Kellogg (NYSE:K) (NYSE: KLG) shares, increasing it to $17.00 from $16.00, while reiterating a Hold rating on the stock. According to InvestingPro analysis, the company appears undervalued at its current price of $16.64, with a strong free cash flow yield of 13%.
Kellogg reported a stronger than anticipated performance in the fourth quarter, with sales and EBITDA (earnings before interest, taxes, depreciation, and amortization) surpassing consensus estimates. The company’s EBITDA stands at $396 million, with InvestingPro data showing an impressive overall financial health score rated as "GREAT". This was attributed to a robust price/mix that compensated for rising volume pressures. Additionally, the company’s gross and EBITDA margins exceeded expectations by approximately 110 and 40 basis points, respectively.
Management provided guidance for 2025, projecting a slight decline in organic sales of about 1%, with EBITDA expected to be between $286 million and $292 million. This forecast is marginally better than consensus estimates. The company maintains a healthy dividend yield of 4.05%, demonstrating strong shareholder returns despite market challenges. The leadership team highlighted forthcoming innovations and commercial strategies set to unfold over the year. For deeper insights into WK Kellogg’s financial health and additional ProTips, visit InvestingPro, where you’ll find comprehensive analysis in our Pro Research Report.
The first quarter is anticipated to be modest due to the timing of Easter and overlapping promotional activities. However, the expectation is that the subsequent quarters will only see a decline of around 0.30%, suggesting that Kellogg will gain market share within a challenging category.
The reiterated Hold rating indicates that while Kellogg is expected to perform well, Jefferies maintains a cautious stance on the stock’s potential for significant upside in the near term.
In other recent news, WK Kellogg Co reported its fourth-quarter earnings, surpassing analyst expectations. The company posted adjusted earnings per share of $0.42 for Q4, exceeding the analyst consensus of $0.23 by $0.19. However, revenue was slightly below estimates at $640 million, marking a 1.8% decrease year over year. For the full year 2024, WK Kellogg reported net sales of $2.708 billion, a 2% decrease from the previous year, citing challenging business conditions. Despite these lower sales, the company improved its profitability with Q4 adjusted EBITDA rising 7.5% YoY to $57 million, and full-year adjusted EBITDA increasing 6.6% to $275 million. Looking ahead, WK Kellogg projects approximately -1% organic net sales growth for 2025, but anticipates adjusted EBITDA to grow 4% to 6%. These recent developments indicate that the company’s efforts to improve productivity and reduce waste in its supply chain are yielding positive results.
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