Kellogg Company (K) is priced right around $62, and has been in the news lately as the company has thrown its hat into the meat substitute ring. Kellogg also offers a dividend around 4%, so those who lean toward guaranteed returns are always considering a stake in this food manufacturer. Let’s take a look at whether Kellogg is worth your hard-earned money.
Most people assume Kellogg is strictly limited to breakfast cereals such as Special K. Kellogg sells several different cereals, toaster pastries, crackers, frozen waffles, cereal bars, fruit flavored snacks and more. As noted above, Kellogg is now selling meat substitutes.
However, the fake meat is not sold under Kellogg’s name. Rather, it is sold under the company’s MorningStar Farms line. If you were to poll vegans and vegetarians about the quality of the MorningStar line, most would testify it is not the tastiest non-meat offering available at stores. Furthermore, health-conscious consumers are hesitant to ingest many of the ingredients in MorningStar products. However, these criticisms likely won’t prove significant enough to stop the masses from buying MorningStar products.
It is quite possible Kellogg will reach one or several high profile agreements with restaurant chains to serve its meat substitutes, sending the stock that much higher. It is also important to note the MorningStar line is available at Target, Walmart, Wegmans and other grocery stores.
Those who are new to meatless products will eagerly try MorningStar Farms products. Kellogg’s other meatless line, Incogmeato, will hit stores by 2020. Incogmeato offerings are made with non-GMO soy, so they are fairly similar to the meatless products made by Impossible Foods. Incogmeato should sell well simply because the line has the backing of Kellogg. If Incogmeato products have even half the success of the MorningStar Farms line, they will be considered a success. If all goes as planned, there is a good chance we will see both MorningStar Farms and Incogmeato fake meat used at restaurants, fast food spots and other culinary destinations within a year or two.
Kellogg’s Pivot to Healthy Foods
Kellogg recently announced an early ’19 investment phase in which the company will zero in on bolstering its nutritional and natural foods offerings as well as foods that promote digestive health. Kellogg also announced it plans on divesting from some of its less healthy offerings ranging from fruit snacks to cookies and beyond. This is a good sign, as the sugar-packed cereals are no longer en vogue in the United States, the United Kingdom, and other markets. It appears as though the pendulum has permanently swung in the direction of healthy foods. The days of sugar-laden cereals lining store shelves are quickly coming to an end. Kellogg is making the transition to nutritional foods at just the right moment in time.
Numbers to Note
Kellogg North America’s operating profit jumped from $1.4 billion to $1.7 billion last year. The company’s net sales increased from $12.85 billion to $13.55 billion. Investment analysts far and wide expect these numbers to increase in the years ahead as the company continues to improve its product line. It is also possible Kellogg will spin off its MorningStar Farms line of meatless offerings as an IPO. The icing on the cake is the fact that Kellogg provides a 4% annual dividend.
Buy, Sell or Hold?
Buy or hold. Kellogg’s MorningStar Farms line certainly has its fair share of flaws yet they should not turn you off of this stock. Anyone who has tried the Beyond Burger will be quick to testify it does not taste great and is not exactly the healthiest food offering on the market. However, these shortcomings have not stopped Beyond’s stock from soaring. The same could prove true for Kellogg if the company can strike deals with restaurants, fast food chains and other eateries to use its MorningStar and/or Incogmeato products. There is plenty of room for this stock to grow, especially if company executives continue to innovate Kellogg’s food offerings. As long as Kellogg successfully pivots away from its unhealthy sugar-laden products to more nutritious products, the stock will likely ascend in due time.