How Will Kellogg (K) Stock React To This Ratings Downgrade?

NEW YORK (TheStreet) -- Kellogg Co. (K) was downgraded to "sell" from "neutral" at Goldman Sachs (GS) on Tuesday due to the firm's belief the company's sales will continue to decline.

Goldman also cited Kellogg's accelerated distribution loss as a reason for the downgrade.

The firm cut its price target on the cereal maker and distributor's stock to $59 from $64.

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Shares of Kellogg are lower by -0.91% to $66.60 in pre-market trading today.

TheStreet Ratings team rates KELLOGG CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate KELLOGG CO (K) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, notable return on equity, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Food Products industry. The net income increased by 30.5% when compared to the same quarter one year prior, rising from $311.00 million to $406.00 million.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market, KELLOGG CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • 44.07% is the gross profit margin for KELLOGG CO which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 10.84% is above that of the industry average.
  • KELLOGG CO has improved earnings per share by 31.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, KELLOGG CO increased its bottom line by earning $4.95 versus $2.68 in the prior year. For the next year, the market is expecting a contraction of 19.4% in earnings ($3.99 versus $4.95).
  • K, with its decline in revenue, slightly underperformed the industry average of 3.1%. Since the same quarter one year prior, revenues slightly dropped by 3.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • You can view the full analysis from the report here: K Ratings Report
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