Analyst on Kellogg Company news: ‘not the enthusiastic response company was hoping for’

Kellogg Company (NYSE: K) ended roughly 2.0% up on Tuesday after the food manufacturer said it will split into three separate public companies.

Piper Sandler analyst reacts to the announcement

The largest of the three will focus on global snacks. Another will deal purely in plant-based food, while the last will be its legacy North American cereal business. Discussing the announcement on CNBC’s “Power Lunch”, Michael Lavery said:

Every though Kellogg is associated closely with cereals, it’s less than 20% of their portfolio. So, if they spin that out, I think they probably expect the remaining 80% of the business to get treated with a different lens.

CEO Steve Cahillane will remain the head of “Global Snacking” once the spin-offs complete in late 2023, as per the press release. “K” is up roughly 5.0% for the year.

Why didn’t the stock respond much to the Kellogg news?

The Piper Sandler analyst, however, cited inflation as he reiterated his sell rating on Kellogg Company. Explaining the “muted” stock price response to the news this morning, he said:

There’s a lot of dis-synergies from these transactions. There are incremental costs we think could be at least 1.0% to 2.0% of current total company sales. It seems like this isn’t the enthusiastic response that the company was hoping for.

According to Michael Lavery, if Kellogg finds success with this split, rivals like Campbell Soup may also consider “deconsolidation” in the future. Kellogg has created a dedicated website to provide updates on the split.

The post Analyst on Kellogg Company news: ‘not the enthusiastic response company was hoping for’ appeared first on Invezz.

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