Kellogg’s 4Q Profit Lags Analysts’ Calls; Street Says Hold

Kellogg Co. reported 4Q earnings per share (EPS) of $0.86 that fell short of analysts’ estimates of $0.89. Revenues for the cereal company in the fourth quarter rose by 7.5% year-on-year to $3.46 billion, but came in slightly below the $3.5 billion Street forecast.

This year, Kellogg (K) expects organic net sales to decline by around 1%, while adjusted EPS is projected to grow by around 1%. Net cash from operating activities is anticipated to be around $1.6 billion with a capex of around $0.5 billion and cash flow of about $1.1 billion.

Kellogg’s CEO Steve Cahillane said, “We enter 2021 with solid momentum, and I remain confident that Kellogg will emerge from this pandemic a stronger Company. We’ve enhanced capabilities, reached incremental households, invested in our supply chain, and improved our financial flexibility. We are on sound footing for continued balanced financial delivery.”

Kellogg’s 4Q revenue growth was driven by organic sales, which grew 2.5% year-on-year to $3.3 billion. The company reported FY20 revenues of $13.7 billion, up by 1.4% year-on-year primarily boosted by sales of snacks, cereal, frozen foods and noodles. (See Kellogg stock analysis on TipRanks)

Following the results, Jefferies analyst Robert Dickerson reiterated a Hold rating and kept a price target of $65 on the stock. Dickerson said, “~$20M net sales miss primarily owing to N.A. shipment timing and AMEA pandemic school closings and civil unrest, but was more than offset by lower SG&A / better fixed cost leverage.”

The rest of the Street is sidelined on the stock with a Hold consensus rating. That’s based on 6 analysts suggesting a Hold and 1 analyst recommending a Sell. The average analyst price target of $64.86 implies 13% upside potential to current levels.

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