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Could Kellogg’s Stock Continue to Underperform Peers?

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Updated

Weak financials weigh on stock

Kellogg’s (K) stock has underperformed broader markets and peers. Whereas most food stocks have recorded stellar double-digit percentage gains this year, Kellogg’s has fallen 1.4%. Conagra Brands (CAG), General Mills (GIS), J.M. Smucker (SJM), Mondelēz International (MDLZ), Campbell Soup (CPB), and Hershey (HSY) have risen 38.3%, 35.1%, 32.5%, 36.3%, 28.6%, and 29.0%, respectively.

Kellogg’s weak organic sales, narrow margins, and high interest expenses have worried investors. Currency volatility has also impacted Kellogg’s.

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What’s expected for Kellogg’s stock?

We expect Kellogg’s stock to stay pressured in the near term, as its sales and margin headwinds aren’t likely to abate soon. Whereas tough year-over-year comparisons, higher input costs, an unfavorable mix, interest expenses, and its weak base business could continue to hurt the stock, the company’s price restructuring initiatives could provide support.

Analysts expect Kellogg’s top and bottom lines to stay low in future quarters as the company annualizes acquisitions and faces tough comps and cost headwinds. Kellogg’s continued sales and earnings weakness could limit recovery in its stock.

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