Kellanova (K): A Year of Strong Performance and Mixed Earnings Results
Based in Battle Creek, Michigan, Kellanova (K) stands out in the food sector, offering a variety of well-known brands and healthy options to customers globally. With a market cap of $27.9 billion, Kellanova significantly influences the consumer staples industry, providing everything from cereals to convenience snacks that meet diverse dietary preferences.
Strong Stock Growth Compared to Market Benchmarks
In the past year, shares of Kellanova have shown impressive gains, outperforming the general market. K stock has increased by 55.5%, while the S&P 500 Index ($SPX) has risen by approximately 35.7%. Further building on this momentum, K stock is up 45.2% in 2024, which exceeds the SPX’s rise of 25.5% year to date.
Comparison Against Sector ETFs
When looking closely at the Consumer Staples Select Sector SPDR Fund (XLP), Kellanova’s performance shines even brighter. Over the last 52 weeks, XLP has only gained around 16.9%. K’s YTD returns also outpace the ETF, which recorded 12.2% for the same period.
Q3 Earnings Beat Expectations, But Concerns Remain
Kellanova’s recent Q3 earnings report, released on October 31, reflected stronger-than-expected revenue and earnings, although stock prices dipped slightly after the announcement. The company reported flat revenue year-over-year at $3.23 billion, and adjusted earnings per share (EPS) of $0.91, surpassing projections by 7%. Adjusted EBITDA also performed well, hitting $548 million with a 1.2% beat against expectations.
However, the free cash flow margin fell to 12.7%, a decrease from 18.1%. On a positive note, organic revenue climbed by 6.1%, demonstrating modest growth, yet total sales volumes remained flat compared to the previous year, improving from a negative 7.4% seen last year during the same quarter.
Outlook and Analyst Ratings
Looking ahead, analysts predict a 15.8% increase in Kellanova’s EPS for the current fiscal year ending in December, projecting it to reach $3.74 on a diluted basis. The company has consistently beat earnings estimates over the past four quarters, demonstrating a solid financial track record.
Currently, Kellanova holds a unanimous “Hold” rating from all 16 analysts covering the stock, which marks a downgrade from a “Moderate Buy” rating three months ago.
Nik Modi from RBC Capital maintained a “Hold” rating on Kellanova as of November 1, with a price target set at $83.50, the highest on the Street, suggesting a 2.9% potential upside from current trading levels. Presently, Kellanova is trading at a premium compared to the average price target of $81.07.
On the date of publication, Rashmi Kumari did not hold (either directly or indirectly) positions in any of the securities mentioned in this article. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
