Kellanova (K), headquartered in Chicago, Illinois, provides snacking, cereal, noodles, and frozen foods. Valued at $25.08 billion by market cap, the company’s brands include Pringles, Cheez-It, Pop-Tarts, Kellogg’s Rice Krispies Treats, RXBAR, Eggo, MorningStar Farms, Special K, and Coco Pops.
Shares of this leader in global snacking have underperformed the broader market over the past year. K has gained 14.3% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 17.7%. However, in 2024, K stock is up 32.5%, surpassing SPX’s 11.5% rise on a YTD basis.
Narrowing the focus, K’s outperformance is apparent compared to the S&P 500 Cons Staples Sector SPDR (XLP). The exchange-traded fund has gained about 4.9% over this period. Moreover, the stock’s gains on a YTD basis outshine the ETF’s 9.7% returns over the same time frame.
On Aug. 5, K shares rose over 16% after Reuters reported that M&M’s and Snickers maker Mars is exploring the potential acquisition of the company.
On Aug. 1, K shares closed up more than 6% after the company reported its Q2 results. Its net sales of $3.19 billion beat the consensus estimates of $3.15 billion. The company’s adjusted EPS was $1.01, surpassing the Wall Street expectations of $0.90. K’s raised its full-year 2024 adjusted EPS guidance to between $3.65 and $3.75 from between $3.55 and $3.65.
The company raised its net sales growth guidance to 3.5% or better from its previous guidance of approximately 3% or better. Moreover, it raised and narrowed its adjusted operating profit guidance range to between $1.88 billion and $1.90 billion, up from the previous guidance of approximately $1.85 billion and $1.90 billion.
For the current fiscal year, ending in December, analysts expect K’s EPS to grow 14.6% to $3.70 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
Among the 16 analysts covering K stock, the consensus rating is a “Hold.” That’s based on three “Strong Buy” ratings and 13 “Holds.”
This configuration is slightly more bullish than three months ago, with two suggesting a “Strong Buy.”
Recently, RBC Capital Markets upgraded K stock from “Sector Perform” to “Outperform” and raised the price target from $62 to $76, implying a potential upside of 3.6% from current levels.
The mean price target of $62.27 represents a 15.1% downside to K’s current price levels. The Street-high price target of $73 suggests a marginal potential downside.
On the date of publication, Dipanjan Banchur did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
