Shares of Kellogg (NYSE:K) crashed yesterday as investors were troubled by the company’s weaker-than-expected sales guidance for 2020. Kellogg’s stock dropped 6.5% to $64.85 a share after it reported a 3% to 4% forecasted decline in earnings per share (EPS) on for 2020.
This was extremely shocking because market analysts had been expecting a 3.6% increase in Kellogg’s 2020 earnings to $4.03 a share.
The Jobs Report was positive in that the US economy created 225K jobs. Unfortunately the unemployment rate edge up to 3.6%. The market is also encouraged by a telephone conversation between US President Donald Trump and Chinese President Xi Jinping. Chairman Xi noted that China is taking the most stringent measures to prevent the spread of coronavirus, and the epidemic will not put pressure on the PRC economy in the long run. Xi Jinping also expressed hope that the terms of the first phase of the trade transaction will be fully implemented. Trump assured that the United States is also ready to continue to work on the implementation of the trade agreement.
Silver Lining For Kellogg
Kellogg is clearly in a strong bear trend, but there are a couple of positives in the report.
- 4th. Quarter Numbers Beat Estimates – The bright news is that Kellogg’s numbers for the 4th quarter of 2019 beat analysts’ estimates. The company reported EPS of 91 cents, which 86 cents that according to Zacks Investment Research.
- Kellogg won on revenue and generated $3.22 billion for the last 3 months of 2019 versus $3.19 billion projected by market analysts. This is important because the net sales were $3.32 billion last year.
Why Should Investors Care?
A approximately a year ago, Kellogg started a very aggressive restructuring plan. It sold off some parts of its business in July that were struggling. Fast forward a couple of months, it beat the street in revenue for the last quarter. This could potentially mean that the restructuring plan is working.
“By executing our Deploy for Growth strategy, we posted sales growth for the full year,” said Steve Cahillane, Kellogg’s CEO, and chairman.
Kellogg stock pays a good dividend of over 3%. Although the stock has dropped, it should be on dividend investors’ watch list.
Kellogg Trading Ideas
Kellogg stock is exceptionally bearish right now. All the technical indicators are negative. It could go as low as $52 (looking at the July numbers), but that is only if it breaks $58.
Traders should watch for price consolidation around $62. This should turn into the new support level. Typically there is a bump up with stocks that have dropped this much.
Kellogg Stock Price Recommendations
Jan-23-20 Initiated Jefferies Hold
Jan-22-20 Initiated Jefferies Hold
Jan-09-20 Upgrade BMO Capital Markets Market Perform → Outperform $70 → $79
Jan-07-20 Upgrade Credit Suisse Neutral → Outperform $60 → $78
Dec-20-19 Upgrade BofA/Merrill Underperform → Buy $53 → $75
Dec-20-19 Upgrade BofA/Merrill Neutral → Buy $75
Dec-12-19 Resumed Deutsche Bank Buy $74
Oct-30-19 Upgrade Edward Jones Hold → Buy
Oct-24-19 Initiated Evercore ISI In-line $67
Oct-17-19 Resumed RBC Capital Mkts Sector Perform $65
Sep-06-19 Upgrade Goldman Neutral → Buy $58 → $72
Jun-25-19 Downgrade Consumer Edge Research Equal Weight → Underweight
Feb-08-19 Downgrade Pivotal Research Group Buy → Hold $90 → $62
Jan-23-19 Initiated Guggenheim Neutral
Nov-14-18 Downgrade JP Morgan Overweight → Neutral
Sep-17-18 Resumed Morgan Stanley Equal-Weight $75
May-04-18 Reiterated Stifel Buy $66 → $62
Mar-01-18 Upgrade Piper Jaffray Neutral → Overweight
Feb-15-18 Reiterated Piper Jaffray Neutral $72 → $77
Feb-09-18 Reiterated Citigroup Buy $91 → $87
Evidence-based financial writer with 9 years of experience specializing in earnings, economic data coverage, and bond markets. I combine fundamentals, technicals, and macro to identify low-risk, asymmetric opportunities.