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Earnings Pressure Is Likely to Hurt Kellogg Stock

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Aug. 18 2020, Updated 6:31 a.m. ET

Stock slumps following first-quarter results

The Kellogg Company (K) posted weaker-than-expected sales in the first quarter of 2019 following which its stock fell more than 5% in the premarket session on May 2. Currency volatility and weakness in its base volumes continued to hurt Kellogg’s organic and net sales growth rates. Adverse currency rates, an unfavorable mix, and higher input and distribution costs are expected to drag its earnings lower.

A higher effective tax rate and increased interest expenses are also likely to lower Kellogg’s bottom line in 2019.

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Stock performance so far

Kellogg stock has underperformed the broader markets as well as most of its peers so far this year. Kellogg stock is up 4.2% on a YTD (year-to-date) basis as of May 1. In comparison, shares of Conagra Brands (CAG), the J.M. Smucker Company (SJM), Mondelēz (MDLZ), General Mills (GIS), and the Hershey Company (HSY) have risen 41.1%, 31.1%, 29.0%, 31.8%, and 14.7%, respectively, on a YTD basis.

Kellogg’s weak first-quarter performance and the continued pressure on its margins and earnings are expected to hurt its stock going forward.

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