Why Has Kellogg Stock Failed To Outperform The S&P Despite Consistent Sales Growth?

K: Kellogg logo
K
Kellogg

Kellogg (NYSE: K) stock price gained 34% from $57 at 2018 end to $76 currently, primarily due to favorable changes in its P/S multiple. The company did witness a rise in its revenue per share over this period too, driven by a rise in sales and a drop in its outstanding share count. However, despite these gains, Kellogg stock has largely underperformed the S&P, which returned around 65% over the same period.

In our interactive dashboard, Why Kellogg Stock Moved: K Stock Has Gained 34% Since 2018, we break down the factors behind this move.

(A) Kellogg’s Total Revenue has risen more than 5% from $13.5 billion in FY 2018 to over $14.3 billion currently

  • Kellogg’s total revenue has risen steadily from $13.5 billion in FY ’18 to $14.2 billion in FY ’21, and currently stands even higher on an LTM basis.
  • As of FY ’21, the North America region made up around 58% of Kellogg’s sales, bring in $8.17 billion for the company.
  • However, sales from North America have, in fact, dropped $200 million over the last two years, with Europe and AMEA (Africa Middle East Asia) witnessing faster sales growth, adding a combined $750 million since FY 2019.
  • For additional details about Kellogg revenues and comparison to peers, see Kellogg (K) Revenue Comparison
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(B) Revenue per share (RPS) rose 8% from $38.81 in FY 2018 to around $41.93 currently

  • Kellogg’s revenue rose from $13.5 billion in 2018 to around $14.3 billion currently, while the outstanding share count dropped from 349.1 million in 2018 to 340 million currently.
  • Due to this, RPS has risen from $38.81 in FY ’18 to $41.93 currently.

(C) Price-To-Sales (P/S) multiple for Kellogg rose from 1.4x in 2018 to 1.7x by 2019 end and stands higher at 1.8x currently, almost 30% higher than its 2018 level

  • Kellogg’s P/S multiple rose to around 1.7x by late 2019, on the back of rising investor expectations surrounding continued demand growth for its products across all regions.
  • However, with North America region sales pulling back, the P.S multiple pulled back to around 1.5x in FY ’20 and FY ’21.
  • Additionally, due to renewed growth prospects, the company’s stock has risen and the P/S multiple currently stands around 1.8x.
  • For additional details about the company’s stock returns and comparison to peers, see Kellogg (K) Stock Return Comparison.

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 Returns Aug 2022
MTD [1]
2022
YTD [1]
2017-22
Total [2]
 K Return 3% 18% 3%
 S&P 500 Return 0% -13% 85%
 Trefis Multi-Strategy Portfolio 0% -14% 245%

[1] Month-to-date and year-to-date as of 8/24/2022
[2] Cumulative total returns since the end of 2016

 

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