Analysts on Wall Street Show Favorability Toward Kellanova's Shares
Kellanova, a Chicago-based company known for its popular brands such as Pringles, Cheez-It, Pop-Tarts, and Kellogg's Rice Krispies Treats, among others, has been experiencing a challenging period.
The company's rating has remained stable in recent months, with a consensus "Hold" rating overall. This consensus is shared by all 15 analysts covering the stock. Notably, Thomas Palmer of Citigroup recently reinstated a "Neutral" rating on Kellanova's stock.
In the trading session following the release of its Q2 results on Jul. 31, Kellanova's stock remained almost flat. The company's adjusted EPS dropped 6.9% year-over-year to $0.94.
Kellanova's underperformance relative to the S&P 500 Index and the sector-focused fund XLP over the past year can be primarily attributed to soft revenue growth, margin pressure, higher costs, and regional sales declines.
Revenue growth was nearly flat, increasing by just 0.3% year over year in Q2 2025, and missing on earnings per share expectations. Adjusted operating profit fell 5%, and adjusted gross margin declined from 36.5% to 34.8%, reflecting increased costs, unfavorable product mix, and weaker demand in mature markets.
North America and Europe, Kellanova’s key regions, experienced declines in organic net sales and operating profit. Specifically, North America saw a 3.8% sales decline and a 5.6% profit decline, while Europe experienced a 5.1% sales decline and a 9.3% profit decline.
Rising restructuring, supply chain modernization, and separation costs have burdened profitability, with significant short-term expenses not yet offset by sales or margin improvements. GAAP metrics like net income and EBITDA margins have sharply deteriorated, driven by weaker sales volumes and cost pressures.
However, Kellanova's strategy involves a pivot to global snacks and convenience foods, relying on brand strength and international growth. Despite this, the company still faces challenges with supply chain efficiency and managing input costs.
In contrast, the S&P 500 index and the consumer staples sector (XLP) have generally shown more stable or positive performance during this time frame.
As of now, analysts expect Kellanova to report an adjusted EPS of $3.67 for the full fiscal 2025, ending in December. The mean price target of Kellanova's stock is $83.39, suggesting a modest 4.5% upside potential from current price levels. Thomas Palmer has set a price target of $83.5 for Kellanova's stock.
It's important to note that all information and data in this article are for informational purposes only. The author, Aditya Sarawgi, did not have positions in any of the securities mentioned in the article at the date of publication.
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In the past year, the S&P 500 Index has gained 21.5%, while Kellanova's stock dropped 1.5% on a YTD basis. Over the past 52 weeks, Kellanova's stock has gained 9%, and in 2025, the S&P 500 Index has returned 7.1%. Kellanova has a market cap of $27.8 billion.
Kellanova manufactures and markets snacks, cereals, noodles, and frozen foods. The company's revenues remained under pressure due to demand softness in the industry, but were positively impacted by demand from emerging markets. Despite missing the Street's bottom-line estimates twice over the past four quarters, Kellanova surpassed the projections on two other occasions, demonstrating a mixed earnings surprise history.
[1] Source: Q2 2025 Earnings Release and Conference Call Transcript, Kellanova [2] Source: Q2 2025 Earnings Release and Conference Call Transcript, Kellanova, and Q1 2025 Earnings Release and Conference Call Transcript, Kellanova [3] Source: S&P 500 Index and XLP performance data, Yahoo Finance
- Despite Kellanova's challenging period with soft revenue growth, margin pressure, higher costs, and regional sales declines, analysts expect the company to report an adjusted EPS of $3.67 for the full fiscal 2025, suggesting potential for future growth in the finance sphere, particularly in investing in stock-market opportunities.
- In the stock-market context, Kellanova's underperformance relative to the S&P 500 Index and the sector-focused fund XLP over the past year, coupled with a "Neutral" rating from Thomas Palmer of Citigroup, might present a cautious approach for potential investors, as the company navigates its restructuring and supply chain efficiency challenges.
