April 26, 2018

Kellogg Company | K

Kellogg Company faces a financial reckoning that we believe will catalyze a 35% fall in its share price. Prescience Point is short the cereal and snack maker.

Download Report Please click here to read our full disclaimer.

Kellogg Company is substantially less profitable, more levered, and more expensive than it seems. We believe K will reduce or miss on 2018 guidance targets and cut its dividend or lose its credit rating.

  • Prescience Point believes Kellogg has been using accounting gimmicks and financial engineering to mask years of falling sales, poor performance and self-serving management decisions.
  • Prescience Point’s analysis indicates Kellogg has pulled forward revenue from future reporting periods and artificially inflated margins and operating cash flow, enabling management to achieve guidance targets and boost executive compensation.
  • By offering extended customer payment terms and switching its US Snacks business from a ‘sell-through’ to ‘sell-in’ model, Kellogg was able to offset steep early payment discounts and pull forward future-period sales, artificially inflating 2016 and 2017 revenues and profits, staving off a significant sales contraction.
  • Kellogg effectively concealed a stuffed channel by selling and securitizing accounts receivables, thereby boosting cash flow from operations.
  • The company faces severe operational and financial headwinds which will bring a reckoning this year. Kellogg may have to cut its dividend or risk a credit ratings downgrade.

 

 

Get our latest Reports delivered to your inbox

© 2023 Prescience Point Capital Management. All rights reserved. Site by North Street.

Prescience Investment Group, LLC is a Registered Investment Advisor with the State of Louisiana and is not currently required to register in any other state. Prescience Investment Group, LLC may only conduct advisory business in those states in which it is registered as an investment adviser or qualifies for a corresponding exemption or exclusion from registration requirements.