Kellogg (K) Files Form 10 Statement for its Planned Split Off
Kellogg Company K recently took a major step toward its previously announced plan to split into two businesses.
The company filed a Form 10 registration statement with the U.S. Securities and Exchange Commission related to the planned separation, which is expected to be completed by the end of this year.
Inside the Headlines
In June 2022, Kellogg announced its intention to split its North American cereal and plant-based food businesses through tax-free spin-offs. With regard to this, in March 2023, the company announced the names of its companies, which are to be formed through the planned separation.
Following the completion of the separation, the two distinct entities will be known as Kellanova and WK Kellogg Co. Kellanova will operate as the global snacking, international cereal and noodles and North American frozen foods business and the North American cereal business will be termed WK Kellogg Co.
Kellanova will flaunt a portfolio of renowned snacking brands like Pringles, Pop-Tarts, Cheez-It, Rice Krispies Treats, RXBAR, MorningStar Farms and Eggo, among others. It will also house some international cereal brands such as Kellogg's, Frosties, Special K, Zucaritas, Crunchy Nut, Corn Flakes, Nutri-Grain and others. WK Kellogg Co. will house a portfolio of leading brands like Kellogg's, Frosted Flakes, Froot Loops, Mini-Wheats, Special K, Raisin Bran, Rice Krispies, Corn Flakes, Kashi and Bear Naked.
With the spin-off, both entities will be able to better allocate their resources toward distinct strategic goals with increased operational flexibility, allowing them to have a considerable standalone scope and creating greater shareholder value.
On completion of this spin-off transaction, Kellanova will continue trading in the New York Stock Exchange (“NYSE”) under the ticker symbol "K," while WK Kellogg Co. shares will be traded on the NYSE under "KLG." Kellogg’s shareholders will be entitled to 100% of the equity in both of these publicly listed companies.
Subject to final approval from Kellogg’s board of directors and other customary conditions, the tax-free spin-off is targeted to be completed in the fourth quarter of 2023. In this connection, Kellanova and WK Kellogg Co. will jointly host an investor day on Aug 9, 2023.
What’s More?
Kellogg delivered impressive first-quarter 2023 results, with both the top and bottom lines beating the Zacks Consensus Estimate. Net sales grew 10.4% year over year, backed by revenue growth management actions, momentum in snacks and continued recovery in the North America cereal business.
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This Zacks Rank #3 (Hold) stock has gained 0.5% in the past six months compared with the industry’s growth of 3.8%.
Driven by solid momentum in its businesses, Kellogg raised its 2023 sales and profit view on its first-quarter earnings call. It expects organic net sales growth to be up 6-7% compared with its earlier guidance of 5-7% growth. The adjusted operating profit is now expected to rise 8-10% at constant currency (“cc”), up from its earlier guidance of 7-9% growth at cc.
Key Picks
Here we have highlighted three better-ranked stocks, namely TreeHouse Foods, Inc. THS, Vital Farms, Inc. VITL and Celsius Holdings CELH.
TreeHouse Foods, a manufacturer of packaged foods and beverages, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
THS has a trailing four-quarter earnings surprise of 49.3%, on average. The Zacks Consensus Estimate for TreeHouse Foods’ current financial year’s earnings suggests growth of 123.1% from the year-ago reported number.
Vital Farms operates as a supplier of pasture-raised products in the United States. The Zacks Consensus Estimate for VITL’s current financial-year sales and earnings per share suggests growth of 27.7% and 1,100%, respectively, from the corresponding year-ago reported figures.
The Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 120%, on average.
Celsius Holdings, which offers functional drinks and liquid supplements, carries a Zacks Rank #2 at present. CELH delivered an earnings surprise of 81.8% in the last reported quarter.
The Zacks Consensus Estimate for Celsius Holdings’ current fiscal year’s sales and earnings implies surges of 69.6% and 154.4%, respectively, from the prior-year numbers.
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