On Wednesday, Evercore ISI adjusted its outlook on shares of WK Kellogg (NYSE:K) (NYSE:KLG), a renowned food manufacturing company. The firm increased the price target for Kellogg's stock to $17.00, up from the previous target of $15.50. The analyst maintained an "In Line" rating for the stock.
The revision follows Kellogg's fourth-quarter earnings report and subsequent discussions with the company. Evercore ISI noted improvements in projected earnings before interest, taxes, depreciation, and amortization (EBITDA) for the year 2024, raising estimates from $260 million to $269 million. This represents a year-over-year increase of 4%, slightly above the consensus of $259 million among other analysts.
The firm's optimism is based on Kellogg's expected gross margin expansion to 29.5%, which surpasses the consensus forecast of 29%, and improved control over selling, general, and administrative expenses (SG&A). The raised price target is now approximately 8 times the estimated EBITDA for the year 2025.
Evercore ISI highlighted that Kellogg's target multiple remains about three turns below the average of its center store peers. However, the gap could narrow as the company provides clearer visibility on sales and makes progress on its three-year supply chain modernization plan. This initiative has the potential to unlock a 500 basis point improvement in profit margins.
The analyst concluded by noting Kellogg's stronger-than-expected outlook for the year 2024, leading to the removal of Evercore ISI's previous "Tactical Outperform" call on the company's stock. The updated assessment reflects confidence in Kellogg's financial performance and strategic initiatives moving forward.
InvestingPro Insights
Following Evercore ISI's positive adjustment on Kellogg's stock, InvestingPro metrics and tips provide additional context for investors considering the company's prospects. With a market capitalization of $1.17 billion, Kellogg's financial health and performance metrics can be evaluated through a closer lens.
InvestingPro data indicates that Kellogg's P/E Ratio stands at 10.66, which might appeal to investors looking for reasonably valued stocks. However, the adjusted P/E Ratio for the last twelve months as of Q3 2023 is -41.02, reflecting challenges in profitability during that period. Nevertheless, the company's Price / Book multiple during the same timeframe is 6.09, which could suggest a higher valuation in terms of the company's net assets.
InvestingPro Tips highlight that analysts are optimistic about Kellogg's future, with net income expected to grow this year and two analysts having revised their earnings upwards for the upcoming period. This aligns with Evercore ISI's positive outlook and could signal a turning point for the company's financial trajectory. Additionally, Kellogg's stock has demonstrated a strong return over the last three months, with a 28.26% price total return, reinforcing the analyst's confidence in the company's stock performance.
For investors interested in further insights, InvestingPro offers additional tips, including an analysis of Kellogg's short-term obligations versus liquid assets and the company's EBITDA valuation multiple. To explore these insights and more, use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 more InvestingPro Tips available, which could help investors make more informed decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.