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WK Kellogg Co (KLG)
NYSE:KLG
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WK Kellogg Co
(NYSE:KLG)
68Neutral
Positive Factors
Financial Performance
WK Kellogg reported 3Q24 adj. EBITDA of $65mm ahead of BofAe $53mm and consensus of $55mm.
Operational Efficiency
Gross and EBITDA margin also came in higher with continued cost discipline, operational efficiencies and timing of brand building spend all coming in favorably.
Negative Factors
Execution Risk
Cautious sentiment on KLG due to structural headwinds in cereal and execution risk involved in the extensive supply chain modernization plan.
Market Share Decline
Market share declines suggest that the spin-off has not yet improved the company's competitiveness in the structurally declining breakfast cereal category.
Sales Performance
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%.
WK Kellogg Co (KLG) vs. S&P 500 (SPY)
Market Cap
$1.66B
Dividend Yield3.35%
Average Volume (3M)943.35K
Price to Earnings (P/E)23.3
Beta (1Y)0.45
Revenue Growth-1.99%
EPS Growth-33.52%
CountryUS
Employees3,280
SectorConsumer Defensive
Sector Strength93
IndustryPackaged Foods
Share Statistics
EPS (TTM)0.82
Shares Outstanding86,196,960
10 Day Avg. Volume745,295
30 Day Avg. Volume943,348
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.78
Price to Cash Flow (P/CF)6.60
P/FCF Ratio33.70
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$17.86Price Target Upside-3.56% Downside
Rating ConsensusModerate Sell
Number of Analyst Covering7
WK Kellogg Co Business Overview & Revenue Model
Company DescriptionWK Kellogg Co (KLG) is a leading food manufacturing company renowned for its extensive portfolio of breakfast cereals and convenience foods. Operating primarily in the Consumer Packaged Goods (CPG) sector, the company is known for its innovative approaches to producing high-quality, nutritious food products. Its core offerings include a wide range of cereal brands, snacks, and plant-based foods that cater to diverse dietary preferences and lifestyles.
How the Company Makes MoneyWK Kellogg Co generates revenue through the production, marketing, and distribution of its cereal and convenience food products. The company's primary revenue streams stem from the sale of these products to retailers and through direct-to-consumer channels. Additionally, strategic partnerships and collaborations with other food and beverage companies, as well as an expansive supply chain network, play a significant role in driving profitability. By leveraging brand recognition, product innovation, and targeted marketing strategies, WK Kellogg Co maintains a competitive edge in the global food industry.
WK Kellogg Co Financial Statement Overview
Summary
KLG shows a stable financial performance with strengths in cash flow management, evidenced by significant free cash flow growth and strong cash generation relative to net income. However, challenges persist in maintaining consistent profits and revenue growth, with fluctuating net profit margins and revenue decreases in recent years. The balance sheet shows improvements in leverage management but reflects volatile profitability, posing potential risks.Income Statement
The company shows a mixed performance in its income statement. The gross profit margin is consistently high, indicating efficient cost management. However, the net profit margin has significantly fluctuated, with recent years showing a decline. Revenue growth has been inconsistent, with a recent decrease in revenue compared to the previous year, which could be concerning. EBIT and EBITDA margins are relatively low, indicating challenges in maintaining operational profitability.68
Positive
Balance Sheet
The balance sheet reveals a moderate financial position. The debt-to-equity ratio shows a decrease due to the reduction of total debt, which is a positive sign for leverage management. However, the return on equity (ROE) is volatile, reflecting uneven profitability. The equity ratio has improved recently, suggesting better asset management but still indicates a potential risk if liabilities rise again.55
Neutral
Cash Flow
Cash flow analysis indicates a strong free cash flow position in recent years, with significant growth. The operating cash flow to net income ratio is high, demonstrating good cash generation relative to accounting profits. Free cash flow to net income ratio supports this view, highlighting effective cash utilization. However, the fluctuations in investing and financing cash flows suggest variability in investment and capital management strategies.72
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.71B | 2.76B | 2.67B | 2.46B | 2.87B | Gross Profit |
| 793.00M | 754.00M | 633.00M | 576.00M | 835.00M | EBIT |
| 109.00M | 92.00M | 74.00M | 37.00M | 196.00M | EBITDA |
| 193.00M | 221.00M | 42.00M | 283.00M | 265.00M | Net Income Common Stockholders |
| 72.00M | 110.00M | -63.00M | 162.00M | 182.00M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 40.00M | 89.00M | -8.00M | -8.00M | 0.00 | Total Assets |
| 1.96B | 1.89B | 1.44B | 1.24B | 1.26B | Total Debt |
| 648.00M | 499.00M | 8.00M | 8.00M | 0.00 | Net Debt |
| 608.00M | 410.00M | 16.00M | 16.00M | 0.00 | Total Liabilities |
| 1.65B | 1.59B | 749.00M | 674.00M | 765.00M | Stockholders Equity |
| 2.00M | 300.00M | 687.00M | 570.00M | 494.00M |
| Cash Flow | Free Cash Flow | |||
| 100.00M | 272.00M | -18.00M | -68.00M | 216.00M | Operating Cash Flow |
| 100.00M | 422.00M | 53.00M | 7.00M | 303.00M | Investing Cash Flow |
| -129.00M | -146.00M | -71.00M | -75.00M | -87.00M | Financing Cash Flow |
| -16.00M | -188.00M | 18.00M | 68.00M | -216.00M |
WK Kellogg Co Technical Analysis
Negative
18.52
Price Trends
18.78
Negative
18.48
Positive
17.66
Positive
Market Momentum
0.18
Positive
57.68
Neutral
83.76
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For KLG, the sentiment is Negative. The current price of 18.52 is below the 20-day moving average (MA) of 19.52, below the 50-day MA of 18.78, and above the 200-day MA of 17.66, indicating a neutral trend. The MACD of 0.18 indicates Positive momentum. The RSI at 57.68 is Neutral, neither overbought nor oversold. The STOCH value of 83.76 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for KLG.
WK Kellogg Co Risk Analysis
WK Kellogg Co disclosed 47 risk factors in its most recent earnings report. WK Kellogg Co reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
WK Kellogg Co Peers Comparison
Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $85.77B | 19.37 | 16.69% | 2.77% | 1.18% | -5.47% | |
75 Outperform | $6.64B | 19.20 | 10.01% | ― | 7.32% | 34.44% | |
73 Outperform | $28.39B | 21.19 | 38.65% | 2.76% | -16.16% | 41.01% | |
68 Neutral | $1.66B | 23.30 | 23.34% | 3.35% | -1.99% | -33.52% | |
66 Neutral | $32.64B | 13.09 | 27.37% | 4.01% | -2.62% | 4.27% | |
66 Neutral | $11.57B | 22.34 | 13.43% | 3.87% | 9.15% | -31.94% | |
62 Neutral | $20.19B | 14.01 | -16.14% | 3.22% | 1.15% | 3.41% |
* Consumer Defensive Sector Average
Performance Comparison
KLG
WK Kellogg Co
18.52
-1.60
-7.95%
CPB
Campbell Soup
36.82
-6.09
-14.19%
GIS
General Mills
56.70
-11.55
-16.92%
K
Kellanova
81.69
26.28
47.43%
POST
Post Holdings
111.91
9.74
9.53%
MDLZ
Mondelez International
64.06
-1.95
-2.95%
WK Kellogg Co Earnings Call Summary
Earnings Call Date: Feb 11, 2025 | % Change Since: 14.53% | Next Earnings Date: May 13, 2025
Earnings Call Sentiment Neutral
The earnings call presented a mixed picture, with strong EBITDA growth and gross margin improvements offset by challenges in net sales and market share, particularly in the US. There were significant achievements in supply chain modernization and innovation, but concerns remain regarding potential tariffs and brand performance in certain segments.Highlights
EBITDA Growth Exceeds Expectations
EBITDA grew 6.6% for the year, exceeding the raised guidance expectations of 5% to 6% growth.
Gross Margin Improvement
Full-year gross margin was 29.8%, a 90 basis point increase versus the prior year.
Successful Supply Chain Modernization
Supply chain performance improved with a significant increase in customer service levels and overall equipment effectiveness.
Innovation and Brand Building
Introduced new platforms like Glaze and continued innovation with products such as Blueberry Bran Crunch and Bear Naked Oats.
Strong Performance in Canada and Caribbean
Canada increased market-leading position by 90 basis points to 38.9% and Caribbean team grew share by 50 basis points for the year.
Lowlights
Net Sales Decline
Net sales declined 1.1% for the year, with a negative impact from currency translation.
Market Share Decline in the US
In the US, in-market dollar sales were down 2.8%, ending the year with a share of 27.4%, a decline of 40 basis points versus the prior year.
Challenges in Special K Brand
Special K underperformed, impacting overall market share performance.
Potential Tariff Impact
2025 guidance does not include the impact of potential significant tariffs on Mexico and Canada, which could create additional challenges.
Negative Free Cash Flow
Free cash flow was negative $29 million, although it came in ahead of expectations primarily driven by timing of core working capital.
Company Guidance
During WK Kellogg's fourth quarter 2024 earnings call, the company provided guidance for 2025, highlighting several key metrics and strategic initiatives. The company reported a slight decline in net sales of 1.1% for 2024, impacted by a 20 basis point headwind due to the weakening Canadian dollar. Gross margin improved by 90 basis points to 29.8%, and EBITDA grew by 6.6%, exceeding the raised guidance of 5% to 6%, with an EBITDA margin of 10.1%, a 70 basis point increase from the prior year. The company plans to invest up to $500 million in modernizing its supply chain, aiming to expand margins by approximately 500 basis points by the end of 2026. For 2025, WK Kellogg expects organic net sales to decline by about 1%, with price realization in the low single digits and volume declining similarly. The company forecasts adjusted EBITDA growth of 4% to 6%, not accounting for potential impacts from tariffs. The strategic focus includes enhancing the supply chain, finalizing separation from Kellanova, and driving innovation, with a robust commercial plan and continued investment in brand building.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.