WK Kellogg Faces Grim Outlook: BofA Analyst Downgrades Stock Amid Persistent Volume Challenges
BofA Securities analyst Peter Galbo downgraded the shares of WK Kellogg Co (NYSE:KLG) from Neutral to Underperform and lowered the price target from $24 to $17.
Volume trends in the packaged food industry have yet to show any meaningful improvement despite the hopes that lapping SNAP (supplemental nutrition assistance program) and a more promotional environment would lead to a volume lift, said the analyst.
Commentary and results from main competitor in U.S. Cereal General Mills Inc (NYSE:GIS) was not constructive with its Cereal business down -4% YoY in its May quarter end, noted the analyst.
The analyst expects industry trends to remain sluggish for KLG over the next 12 months unless a more full scale promotional/price investment reset is contemplated.
WK Kellogg expects flat sales growth through 2026, outpacing expected category low-single digits declines. However, Nielsen scanner trends have remained soft with negative sales growth and share losses persisting, said the analyst.
According to the analyst, lackluster volume recovery could lead KLG to have to reinvest more heavily into its P&L, which will stunt margin expansion in the short run to help stabilize volumes.
The cereal category has seen prolonged volume pressure and the analyst does not see a path for meaningful improvement over the near term.
Price Action: KLG shares are trading lower by 1.80% at $15.83 at last check Wednesday.
