WK Kellogg Co. (KLG Quick QuoteKLG - Free Report) posted mixed fourth-quarter 2024 results, wherein the top line declined year over year and missed the Zacks Consensus Estimate. However, this leading branded ready-to-eat cereal provider’s bottom line increased from the year-ago period and beat the consensus mark. 

WK Kellogg’s adjusted earnings per share were 42 cents, surpassing the Zacks Consensus Estimate of 25 cents. This metric increased from adjusted earnings of 29 cents in the year-ago quarter.

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The company recorded adjusted net sales of $640 million, missing the Zacks Consensus Estimate of $643 million. Also, the top line declined 1.8% year over year. In the fourth quarter, the price/mix rose 3.8%, while volume moved down 5.6%. The decrease in net sales for the quarter was led by a persistently challenging business environment and the negative impacts of foreign exchange translation due to the Canadian Dollar weakening against the U.S. Dollar.

WK Kellogg’s Margin & Cost Details

Adjusted gross profit was $195 million, up from $190 million in the year-ago period. The adjusted gross margin expanded 130 basis points (bps) to 30.5% from 29.2%. This was due to continued cost discipline and operational efficiency improvements.

WK Kellogg’s adjusted EBITDA came in at $57 million, up 7.5% year over year. The upside can be attributed to enhanced productivity and reduced waste in the company’s supply-chain operations. We note that the adjusted EBITDA margin increased 70 bps year over year to 8.9% in the quarter under review due to a gross margin improvement.

Selling, general and administrative expenses were $163 million, down 1.2% from $165 million in the year-ago quarter. As a percentage of sales, the metric came in at 25.5%, up 20 bps from 25.3%.

KLG’s Financial Snapshot: Cash, Debt & Equity Overview

The Zacks Rank #3 (Hold) company ended the quarter with cash and cash equivalents of $40 million, long-term debt of $460 million, and total equity of $317 million. WK Kellogg generated cash from operating activities of $100 million for the year ended Dec. 28, 2024.

Management recently unveiled a 3% dividend hike, taking its quarterly dividend from 16 cents to 16.5 cents per share. The raised dividend is payable on Mar. 14, 2025, to shareholders of record as of Feb. 28.

KLG Stock Past Three-Month Performance

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WK Kellogg’s 2025 Guidance

First-quarter 2025 net sales and profit are expected to be negatively impacted by shipment timing due to a later Easter and the lapping of a large retailer promotion. These factors will result in an additional 1.5-2.5% decline in first-quarter net sales versus full-year guidance. Given these factors, the impacts of the 53rd week, along with the reinvestment in previous quarters, EBITDA growth is expected to be more weighted toward the back half of the year.

For 2025, organic net sales are expected to decline 1%, with a shift to a currency-neutral basis due to increased foreign exchange volatility. The net sales guidance excludes the impacts of the 53rd week, which accounts for growth of 1.5 percentage points. Price increases in the low-single digits are anticipated, driven by the carryover impacts of PPA and RGM initiatives, while volume is expected to decline at a similar rate.

Adjusted EBITDA is projected to grow 4-6%, incorporating the impacts of the 53rd week. The incremental EBITDA from the 53rd week will be reinvested into the company’s brands to support long-term business health. This guidance remains consistent with previous commentary, targeting EBITDA growth in line with 2024, delivering $286-$292 million.

Regarding capital investments, the 2025 plan prioritizes strategic initiatives, base business CapEx and dividend funding, supported by a strong cash flow and available debt capacity. Base business CapEx is expected to be $70 million, or 2.5% of net sales, with an additional $60 million allocated to exiting the transition services agreement. The expenditure will be funded through the cash flow, while strategic initiatives, including $200 million for supply-chain modernization, will be financed through debt.

The KLG stock has lost 2.9% in the past three months compared with the industry’s 1.5% decline.

Better-Ranked Stocks to Consider

Here, we have highlighted three better-ranked stocks, namely United Natural Foods, Inc. (UNFI Quick QuoteUNFI - Free Report) , Treehouse Foods, Inc. (THS Quick QuoteTHS - Free Report) and US Foods Holding Corp. (USFD Quick QuoteUSFD - Free Report) .

United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. It presently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for UNFI's current fiscal-year earnings and sales indicates growth of 442.9% and 0.3%, respectively, from the year-ago reported figures. UNFI delivered a trailing four-quarter average earnings surprise of 553.1%.

Treehouse Foods is a manufacturer of packaged foods and beverages. It has a Zacks Rank of 2 (Buy) at present.

The Zacks Consensus Estimate for THS’s current financial-year earnings and sales indicates declines of 20.7% and 4.3%, respectively, from the year-ago reported figures. THS delivered a trailing four-quarter average earnings surprise of 20.4%.

US Foods is a food-service distributor. The company currently carries a Zacks Rank #2. 

USFD delivered a negative trailing four-quarter earnings surprise of 0.4%, on average. The Zacks Consensus Estimate for US Foods’ current financial-year earnings and sales indicates growth of 18.6% and 6.3%, respectively, from the year-ago reported figures.