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On Wednesday, Evercore ISI analysts adjusted their outlook on WK Kellogg (NYSE:KLG) stock, reducing the price target from $20.00 to $19.00 while maintaining an In Line rating. With the stock currently trading at $17.93, analyst targets range from $14 to $28, according to InvestingPro data. The company maintains profitability with a gross margin of 29.2%, though its financial health score stands at "FAIR." The firm anticipates that Kellogg has significant productivity potential for 2026, highlighted by a nearly 25% reduction in the labor force due to a plant closure. They also noted Kellogg’s plans to innovate and market towards protein-focused consumers. InvestingPro analysis reveals the company generated $2.66 billion in revenue over the last twelve months, though facing challenges with negative free cash flow of $29 million.
Despite these positive productivity prospects, Evercore ISI revised its estimates downward due to current sales challenges and increased promotional spending, which are only partly mitigated by administrative cost savings. In light of the first quarter earnings and subsequent discussions with the company, the analysts have lowered their organic sales growth forecast from a 2% decline to a 3% decline, contrasting with a consensus of a 1% decline.
The downgraded sales outlook reflects a continued loss in market share of 100 basis points year-over-year in the US cereal segment, softness in the Canadian market, and an anticipated flat price/mix in the second half of the year as Kellogg ramps up promotional activities. Consequently, the estimated EBITDA for 2025 has been reduced from $292 million to $271 million, representing a 1% decline year-over-year, which is below the consensus estimate of $292 million.
The new price target of $19.00 is based on an 8x multiple of the projected 2026 EBITDA of $310 million, which is expected to grow by 14% year-over-year, yet is below the consensus estimate of $332 million. Evercore ISI’s target multiple is approximately 1.5 turns lower than the average of Kellogg’s domestic center store peers. This adjustment reflects a cautious stance as analysts await to see if Kellogg’s growth spending will stabilize market share. According to InvestingPro, the stock currently trades at an EV/EBITDA multiple of 7.56x, with additional valuation insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of KLG and 1,400+ other US stocks.
In other recent news, WK Kellogg Co. (NYSE:K) reported its first-quarter 2025 earnings, which fell short of market expectations. The company announced earnings per share (EPS) of $0.20, significantly below the projected $0.36. Revenue also missed forecasts, coming in at $663 million compared to the anticipated $696.92 million. Despite these challenges, management expressed optimism about future performance, expecting sequential improvements in the latter half of 2025. The company aims for a 500 basis points EBITDA margin expansion by 2026, driven by strategic brand investments and distribution gains. WK Kellogg is adapting to consumer trends by focusing on health and wellness, which is seen as a long-term positive shift for the category. Analysts have noted that the company is navigating a difficult market environment, particularly in the U.S. cereal category. However, WK Kellogg is confident in leveraging its brand portfolio to maintain its competitive position.
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