How Will Kellogg (K) Stock React To Possible Deal For United Biscuits?

NEW YORK (TheStreet) -- Kellogg  (K) is in talks to purchase U.K.-based United Biscuits for $3.37 billion, naming investment bankers at Barclays  (BCS) to assess an offer for the food manufacturer, Sky News reports.

Shares of Kellogg are up 2.43% to $62.89.

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 notable return on equity, good cash flow from operations and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • 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.
  • Net operating cash flow has slightly increased to $386.00 million or 5.17% when compared to the same quarter last year. Despite an increase in cash flow, KELLOGG CO's cash flow growth rate is still lower than the industry average growth rate of 37.36%.
  • 42.52% is the gross profit margin for KELLOGG CO which we consider to be strong. Regardless of K's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 8.00% trails the industry average.
  • K, with its decline in revenue, slightly underperformed the industry average of 4.1%. Since the same quarter one year prior, revenues slightly dropped by 0.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • KELLOGG CO's earnings per share declined by 14.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings 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 19.6% in earnings ($3.98 versus $4.95).

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