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Morningstar’s Analysis

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While the Market Has Soured on Wide-Moat Kellogg, We Think Shares Offer Investors a Tasty Treat

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

In a sector where undervalued opportunities are few and far between, we think investors should consider snacking on wide-moat Kellogg, which trades 25% below our $82 fair value estimate and boasts a 4% dividend yield. Kellogg has benefited from pandemic-related gains in the retail channel (which drives 90% of its sales) as consumers continue to spend more time at home, chalking up mid- to high-single-digit organic sales growth over the past few quarters. However, shares haven’t popped. In this vein, Kellogg's stock was down 7% during calendar 2020, which pales relative to the 14% gain the Morningstar U.S. Consumer Defensive Total Return Index clocked over the same period.

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Company Profile

Business Description

Founded in 1906, Kellogg is a leading global manufacturer and marketer of cereal, cookies, crackers, and other packaged foods. Its offerings are manufactured in 21 countries and marketed in more than 180 countries. Its product mix includes well-known brands such as Special K, Frosted Flakes, Froot Loops, Rice Krispies, Pop-Tarts, Eggo, Kashi, and Morningstar Farms. The firm added the Pringles brand to its mix in 2012. Sales outside its home turf account for around 40% of Kellogg's consolidated sales base.

One Kellogg Square
Battle Creek, MI, 49016-3599
T +1 269 961-2000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Sep 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 31,000