Kellogg Raised To Outperform At Credit Suisse

Kellogg Co. shares are up 3.1% Monday morning after Credit Suisse upgraded the stock to outperform from neutral and raised its price target to $76 from $72. After Kellogg's investor day on Nov. 20, Credit Suisse believes the company "represents the best risk-reward in our space." In the third quarter, the company had 2% sales growth excluding currency, reported 6% operating profit growth (excluding executive compensation) and increased gross margins by 20 basis points, which Credit Suisse calls "top-tier performance in the context of the consumer staples sector." The Kashi business, which is focused on natural, healthy food, is expected to return to a growth in 2016, the company is better targeting millennials by removing artifical colors and flavors while adding items like nuts and granola, and, according to the bank's math, it has reached a $450 million reduction in operating working capital over the past three years. Management pressure to achieve goals over the next couple of years, either from activist investors or the board, may also be having an impact, analysts wrote.