Market Overview

Credit Suisse Thinks Kellogg Will Follow General Mills' Lead Into A Strategic Shift

Share:
Credit Suisse Thinks Kellogg Will Follow General Mills' Lead Into A Strategic Shift
Related K
Analyst: Kellogg's Recent Pullback Is A Buying Opportunity
Stocks Going Ex Dividend The Fifth Week Of November
Kellogg sets new two-year $1.5B buyback authorization (Seeking Alpha)
Related KO
On This Day In Market History: Warren Buffett Buys First Shares Of Berkshire Hathaway
Report: Oklahoma Judge's Treatment Program Masked Unpaid Labor For Coca-Cola Bottler, Others
My Journey To Financial Independence: 86-Stock November Portfolio Update - Buying Apple, AbbVie And BMW (Seeking Alpha)

Credit Suisse’s Robert Moskow highlighted Kellogg Company (NYSE: K) "rising probability" of rising margins and a changing M&A environment, while raising the company’s price target from $86.00 to $94.00.

Moskow believes Kellogg management will “follow the lead of its closest rival,” General Mills, Inc. (NYSE: GIS) by accelerating its long-term margin goals. “The market's resounding approval of General Mills' strategic shift gives the Kellogg management team a ‘green light’ to put more emphasis on cost savings and less on growth,” stated the Credit Suisse analyst.

Roll-Out Of Zero-Based Budgeting

Moskow thinks Kellogg's adaptation of zero-based budgeting in the company’s international division has given the company “plenty of fuel to drop incremental savings to the bottom line.” Since Kellogg’s operating margins have fallen below competitors' figures extensively, Moskow believes there is significant room to strengthen them, if management takes the correct steps; initiating a zero-based budget is a step in the right direction.

Related Link: Credit Suisse's Contrarian Calls On AK Steel, Kellogg's And Others

Take-Out Bid

Over the past week, chatter indicated a possible takeout bid from The Coca-Cola Co (NYSE: KO), or, to a lesser extent, Kraft Heinz Co (NASDAQ: KHC) According to CNBC Wednesday, however, Kraft Heinz was not in talks with Kellogg.

Absence Of M&A Talks 'Won't Matter'

Moskow stated, however, that even if there is an absence of M&A news, it “won’t matter as long as the management team provides evidence that it is acting with a higher sense of urgency to create shareholder value.” In the analyst’s experience, management teams sometimes “leverage take-out speculation to further their case internally for more stringent measures to implement change.”

According to TipRanks, Moskow is among the better analysts covering Kellogg, holding a 60 percent success rate and a +3.9 percent average return per recommendation. The analyst is ranked 1,001 out of 4,073 analysts.

Moskow holds an Outperform rating on Kellogg.

At time of writing, Kellogg traded at $82.70, up 0.62 percent on the day.

Full ratings data available on Benzinga Pro.

Did you like this article? Could it have been improved? Please email feedback@benzinga.com with the story link to let us know!

Latest Ratings for K

DateFirmActionFromTo
Dec 2017DZ BankDowngradesBuyHold
Nov 2017ArgusUpgradesHoldBuy
Nov 2017UBSMaintainsNeutral

View More Analyst Ratings for K
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas Price Target Commodities Reiteration M&A Markets Analyst Ratings Best of Benzinga

 

Related Articles (GIS + K)

View Comments and Join the Discussion!

Partner Center