Kellogg’s downgraded at Deutsche Bank ahead of earnings

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The Kellogg Company (NYSE:K) is courting a more cautious commentary from analysts on Monday morning.

While consumer staples companies have suddenly become market darlings, Kellogg’s (K) is still dealing with a spate of issues that cloud its investment thesis. As such, Deutsche Bank analyst Steve Powers downgraded shares to Hold from Buy while cutting his price target by $1 to $73 per share.

The Hold rating conforms with the broader Street consensus, as 13 of 22 analysts surveyed have put forth the same designation. Of the remaining analysts, 5 advise a Sell while only 4 have assigned a Buy rating to the stock.

Powers noted that worker strikes, macroeconomic issues like inflation and supply chain disruptions, and the negative impact of the war in Ukraine hang over the company at present. Ahead of its earnings release in early April, Powers advised the risk/reward dynamics are less than promising.

While an agreement was reached in the recent headline labor dispute, its conclusion at the close of the quarter was noted as likely to weigh on results.

“We see growing risks to top-line momentum, US cereal recovery, and margin rebuilding over the balance of FY22 and into FY23 from escalating consumer concerns around trade down/elasticity (whether in the US, Europe, or Africa) and further accumulation of…cost/FX pressures,” he explained.

He added that the recent outperformance of Kellogg’s (K) relative to the S&P bodes poorly for any anticipation of a pop on its May 5 earnings release. In fact, Powers pointed to the hot run into earnings as further impetus for disappointment on earnings day.

Shares fell over 1% shortly after Monday’s market open.

Read more on the impact of import and export restrictions on the cereal industry.