Kellanova Earnings: Brand Spending Buttresses Competitive Edge; Shares Still a Bargain

The market cheered narrow-moat Kellanova’s first-quarter results of 5.4% organic sales growth and a 380-basis-point rise in adjusted operating margin to 15.9%, sending the shares up by a high-single-digit percentage intraday. We think this signals that the firm’s advantaged geographic and category reach—30% of sales are from faster-growing emerging markets, and snacking accounts for more than half of sales—is finally getting some rightful acclaim. Even after the rally, we view the stock as attractive, trading at a 15%-20% discount to our intrinsic valuation.