Headquartered in Battle Creek, Michigan, Kellanova (K) is a significant player in the food industry, focused on delivering a diverse portfolio of iconic brands and nutritious products to consumers worldwide. With a market cap of $27.9 billion, Kellanova plays a vital role in the consumer staples sector, offering a wide range of cereals, snacks, and convenience foods that cater to various dietary needs and preferences.
Shares of the global snacking company have outperformed the broader market considerably over the past year. The stock has gained 55.5% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 35.7%. In 2024, K stock is up 45.2%, surpassing SPX’s 25.5% rise on a YTD basis.
Zooming in further, K’s outperformance looks more impressive compared to the Consumer Staples Select Sector SPDR Fund (XLP). The exchange-traded fund has gained about 16.9% over the past 52 weeks. Moreover, the stock’s gains on a YTD basis outshine the ETF’s 12.2% returns over the same time frame.
Shares of Kellanova dipped slightly after it posted its Q3 earnings results on Oct. 31, exceeding Wall Street’s expectations for both revenue and earnings. Revenue was flat year-over-year at $3.23 billion, while adjusted EPS reached $0.91, beating estimates by 7%. The company’s adjusted EBITDA was also slightly ahead of expectations, reaching $548 million, a 1.2% beat.
Despite these results, the free cash flow margin dropped to 12.7%, down from 18.1%. Notably, organic revenue increased by 6.1%, reflecting modest growth, though sales volumes remained flat year over year, an improvement from the negative 7.4% recorded in the same quarter last year.
For the current fiscal year, ending in December, analysts expect Kellanova’s EPS to grow 15.8% to $3.74 on a diluted basis. The company’s earnings surprise history is impressive. It beat the consensus estimate in each of the last four quarters.
K has a unanimous “Hold” rating from all 16 analysts covering the stock. That’s a downgrade from the “Moderate Buy” rating three months ago.
On Nov. 1, Nik Modi from RBC Capital maintained a “Hold” rating on Kellanova, with a price target of $83.50 – the Street-high, which indicates a 2.9% upside from the current levels. Meanwhile, K is currently trading at a premium to the mean price target of $81.07.
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