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What Kellogg’s Valuation and Analysts’ Ratings Indicate?



Unattractive valuation

Despite the recent weakness in the Kellogg Company (K) stock, it looks unattractive on the valuation front. Kellogg stock is trading at a forward PE multiple of 14.7x, ~13% lower than its three-year average historical multiple of 16.9x. The stock is also trading at a lower valuation multiple than the majority of its peers. Shares of General Mills (GIS), the J.M. Smucker Company (SJM), and the Campbell Soup Company (CPB) are trading at forward PE multiples of 16.1x, 15.3x, and 15.7x, respectively.

A projected double-digit decline in Kellogg’s 2019 adjusted EPS and weak organic sales make it unattractive on the valuation front.

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Analysts’ recommendations

The majority of analysts covering Kellogg remain on the sidelines owing to the company’s persisting sales and margin headwinds. Among the 19 analysts tracking the stock, 12 have given it “hold” ratings. Four analysts have given it “buys,” and three have given it “sells.”

Analysts’ consensus target price of $58.82 per share on Kellogg stock indicates a potential 4.2% upside based on its closing price of $56.44 on May 20.

Besides Kellogg, Wall Street recommends “holds” on General Mills and J.M. Smucker stocks owing to the continued pressure on their earnings. Meanwhile, Wall Street suggests “buys” on Conagra Brands and Mondelēz (MDLZ) stocks.


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