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Kellogg Pops on Solid Start to Fiscal 2021; Shares Still Strike Us as a Bargain

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

Even in the face of robust marks a year ago, wide-moat Kellogg exhibited resilience in the first quarter, posting 4.2% organic sales growth (6% on a two-year stack), 30 basis points of adjusted gross margin gains to 33.2% (despite commodity inflation beginning to rear its head), and 100 basis points of improvement at the adjusted operating income line to 13.9% (despite a high-single-digit bump in brand spend). As a result, management raised its full-year targets, which call for organic sales to hold flat (versus a 1% pullback prior), adjusted operating profit to edge down 1%-2% (a 2% drop), and adjusted EPS to tick up 1%-2% (a 1% increase). While far from robust, when viewed relative to fiscal 2019 (up 3%, 4%, and 5%, respectively), we think these aims signal the strides taken to steady the business the past few years.

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Company Profile

Business Description

Founded in 1906, Kellogg is a leading global manufacturer and marketer of cereal, cookies, crackers, and other packaged foods. Its offerings are manufactured in 21 countries and marketed in more than 180 countries. Its product mix includes well-known brands such as Special K, Frosted Flakes, Froot Loops, Rice Krispies, Pop-Tarts, Eggo, Kashi, and Morningstar Farms. The firm added the Pringles brand to its mix in 2012. Sales outside its home turf account for around 40% of Kellogg's consolidated sales base.

Contact
One Kellogg Square
Battle Creek, MI, 49016-3599
T +1 269 961-2000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 31,000

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