K
Kellogg Co
Consumer
02/26/2019
Presented
| Date | 02/25/2019 |
| Price | $55.66 |
| Market Cap | $19.15B |
| Ent Value | $29.05B |
| P/E Ratio | 14.51x |
| Book Value | $7.56 |
| Div Yield | 4.02% |
| Shares O/S | 344.00M |
| Ave Daily Vol | 2,914,118 |
| Short Int | 4.78% |
Current
| Price | $80.93 |
| Market Cap | $27.90B |
| Kellogg Co. engages in the manufacturing, marketing, and distribution of cereal and convenience foods, including cookies, crackers, toaster pastries, cereal bars, frozen waffles, and meat alternatives. It operates through the following segments: U.S. Morning Foods, U.S. Snacks, U.S. Specialty, North America Other, Europe, Latin America, and Asia Pacific. The U.S. Morning Foods segment includes cereal, toaster pastries, health and wellness bars, and beverages. The U.S. Snacks segment offers cookies, crackers, cereal bars, savory snacks, and fruit-flavored snacks. The U.S. Specialty segment represents food away from home channels, including food service, convenience, vending, Girl Scouts, and food manufacturing. The North America Other segment includes U.S. Frozen, Kashi, and Canada operating segments. The Europe segment consists of European countries. The Latin America segment comprises of Central and South America and includes Mexico. The Asia Pacific segment composes of Sub-Saharan Africa, Australia, and Asian and Pacific markets. The company was founded by Will Keith Kellogg in 1906 and is headquartered in Battle Creek, MI. |
Publicly traded companies mentioned herein: Kellogg Company (K), Kraft Heinz Co (KHC)
Highlights
Kellogg (K) is presently in a precarious position, in the presenter’s opinion. The stock is richly valued at $55 (14x and 11.8x consensus 2019 EPS and EBITDA estimates, respectively), and the business is pretty clearly a “melting ice cube” with some additional, classic red flags like: management turnover, communication issues, potentially aggressive accounting, and risks that come with an over-leveraged balance sheet. Street estimates have come down for this year, but analysts appear to be buying into management’s 2H’19 reacceleration/turnaround story. On the other hand, the presenter is short, and if the bearish assessment of the setup and outlook prove to be accurate, EBITDA is likely to come in meaningfully below estimates for this year. Given the current valuation, the risk/reward for the short position is attractive, as any contraction in the multiple results in meaningful downside risk. In a base case, the target is $45 - $48; in a more bearish scenario, a target in the $30s is defensible.
◆Signing up and creating account with us unlocks this content for you. Contact us today for full access to DeMatteo Research and more.
◆Signing up and creating account with us unlocks this content for you. Contact us today for full access to DeMatteo Research and more.