Kellogg Company (NYSE: K) is a stable company with a good position in the market, but the stock price is still not able to stabilize above the $70 resistance level. Kellogg continues to expand its business, and at the current stock price, this company is fairly valued.
Fundamental analysis: Argus assigned a buy rating on Kellogg with a $72 price target
Kellogg Company is an American multinational food manufacturing company that produces cereal and convenience foods. The breakfast-cereal consuming population in the US is expected to grow from 283 million to 290 million in 2024, and Kellogg Company can still rely on positive consumer preferences that have evolved to lean towards healthy foods.
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Kellogg Company reported first-quarter results at the beginning of this month; total revenue has increased by 5% Y/Y to $3.58 billion while GAAP EPS for the same period was $1.07 (beats by $0.12). It is important to say that adjusted operating income grew 13.3% to $497 million in the first quarter, and the company’s sales through retail channels remained strong.
“Our biggest brands continued to show strong momentum, aided by sustained consumer communication and innovation activity. There why we gained a share in most of our key markets and categories around the world,” said Steven Cahillane, President, and Chief Executive Officer.
Total revenue has increased above expectations (beats by $200 million), and the company raised its outlook for the 2021 fiscal year. Kellogg expects that net sales should be approximately flat year-on-year from previous guidance of about negative 1%.
Kellogg Company is a stable company with a good position in the market, while its shares could be a good choice for any investor seeking secure dividend income. The dividend yield is around 3.51% at the current share price, and Argus assigned a buy rating on Kellogg with a $72 price target on its view that cost-savings initiatives will be a big factor in the post-COVID environment.
An analyst Chris Graja from Argus, also said that Kellogg’s shares are worth approximately $75 based on analysis with dividend discount model. Kellogg announced plans to increase the dividend and resume the share repurchase program, and according to Argus, it will be able to pay out approximately 75% of earnings as dividends.
Kellogg Company trades at less than ten times 2020 EBITDA, and with the market capitalization of $22.64 billion, shares of this company are reasonably valued.
Technical analysis: $70 represents the first resistance level
The critical support levels are $60 and $55; $70 and $75 represent the current resistance levels. If the price jumps above $70 resistance, it would be a signal to trade shares, and the next target could be around $72.
Rising above $75 supports the continuation of the bullish trend for Kellogg shares, but if the price falls below $60, it would be a strong “sell” signal.
Kellogg Company reported better than expected first-quarter results at the beginning of this month and raised its outlook for the 2021 fiscal year. Kellogg Company trades at less than seven times 2020 EBITDA, and Argus assigned a buy rating on Kellogg with a $72 price target.
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