Last update on 2024-06-07

Kellogg (K) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore Kellogg (K) with Piotroski F-Score of 6/9 in 2023, evaluating profitability, liquidity, and operating efficiency to determine financial strength.

Short Analysis - Piotroski Score: 6

We're running Kellogg (K) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Kellogg (K) has received a Piotroski F-Score of 6 out of 9, indicating a moderately strong financial position based on profitability, liquidity, and efficiency. The company shows a consistent positive net income and cash flow from operations, indicating strong profitability and liquidity. It also showed minor improvements in ROA, operating cash flow, gross margin, and asset turnover ratio. However, the company struggled with increasing leverage, a declining current ratio, and an increase in outstanding shares, impacting its Piotroski score negatively.

Insights for Value Investors Seeking Stable Income

Kellogg (K) appears to be a stable company with moderate financial strength. If you're an investor looking for solid dividend stocks, Kellogg could be worth considering due to its consistent positive cash flow and net income. However, be mindful of its recent issues with increasing leverage and declining liquidity. Make sure to conduct a thorough analysis and consider industry comparisons before making any investment decisions.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Kellogg (K)

Company has a positive net income?

Net income refers to the total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue. It is a key indicator of a company's financial health and profitability.

Kellogg's net income for 2023 stood at $951 million, indicating profitability. This figure being positive contributes positively to the Piotroski F-Score, granting the company 1 point in this criterion. Analyzing the historical data, Kellogg has experienced fluctuations in net income over the past two decades. However, it has consistently reported positive net income, enhancing its credibility and stability as a financially resilient entity. For instance, the highest net income in this period was $1.807 billion in 2013, while the lowest, $614 million, was in 2015.

Company has a positive cash flow?

Cash flow from operations (CFO) is a crucial metric assessing a company's liquidity and financial health. Positive CFO indicates robust internal cash generation.

For Kellogg (K) in 2023, CFO stands at $1.645 billion. This positive cash flow suggests strong cash generation capabilities, a crucial indicator of sustainability. Over the past 20 years, Kellogg has consistently maintained positive CFO, which bolstered its financial stability and operational confidence.

Return on Assets (ROA) are growing?

Return on Assets (ROA) gauges a company's profitability in relation to its total assets. Analyzing the change in ROA over time helps assess efficiency improvements.

In 2023, Kellogg's ROA improved to 0.0557 from 0.0524 in 2022. This represents a modest but encouraging increase, indicating slightly better asset utilization to generate profits. Given this upward trend, Kellogg gains 1 point in the Piotroski F-Score for this criterion. However, it's crucial to contrast this with the industry median ROA, which remains significantly higher at 0.282 for 2023. This disparity indicates that despite improvements, Kellogg still trails its industry peers in asset profitability.

Operating Cashflow are higher than Netincome?

The Operating Cash Flow higher than Net Income criterion assesses if a company generates sufficient cash flows from its core operations to cover its Net Income.

For Kellogg (K) in 2023, the Operating Cash Flow is $1,645,000,000 compared to Net Income of $951,000,000. This indicates that Kellogg is generating ample cash flow from its operational activities exceeding its net income, earning a score of 1 point for this criterion. Over the past 20 years, Kellogg has consistently shown a robust trend in operating cash flows, such as in years 2007 ($1,503,000,000), 2012 ($1,758,000,000), and 2020 ($1,986,000,000), while comparably maintaining positive net income, evidencing efficient cash management, which is considered good for this criterion. This healthy trend likely signals firm control over earnings quality and implies strong operational efficiency and liquidity, crucial for sustaining long-term financial health and investment attractiveness.

Liquidity of Kellogg (K)

Leverage is declining?

Change in leverage measures the degree to which a company has funded its operations with debt and other liabilities rather than equity. It indicates financial health and risk management.

Kellogg (K) has seen an increase in its leverage ratio from 0.3135 in 2022 to 0.3598 in 2023. This is a rise of approximately 15%. Despite the historical decrease seen in recent years, the rise in 2023 may signal higher financial risk and a greater reliance on debt financing, which could impact the company's financial stability. Evidently, the leverage ratio remains lower compared to its heights in 2009 (0.432) and 2015 (0.4792). However, an upward trend necessitates a closer assessment of Kellogg's ability to manage its liabilities. Hence, no point is added for improvement in leverage.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term obligations with its short-term assets. This is crucial for assessing a company's liquidity.

Comparing Kellogg's current ratio of 0.6581 in 2023 to the ratio of 0.6593 in 2022, it shows a minor decrease. The current ratio did not increase, thus setting the point to 0 for this criteria. Despite Kellogg's consistent performance, the industry median current ratio has remained significantly higher, surpassing 1.6 in all years depicted. This underperformance in liquidity relative to the industry benchmark indicates a need for potential operational or financial restructuring to enhance short-term financial health. Overall, this slight decline is unfavorable.

Number of shares not diluted?

Change in shares outstanding is a critical criterion as it reflects company decisions such as stock buybacks.

From 2022 to 2023, Kellogg's outstanding shares increased from 341,637,011 to 342,086,331. This represents a rise of 449,320 shares, indicating the company issued more shares rather than buying them back. While stock buybacks can signal management's confidence in the company's future prospects, an increase might be due to stock-based compensation or capital-raising efforts. Given this rise, we accord 0 points for this criterion.

Operating of Kellogg (K)

Cross Margin is growing?

Change in Gross Margin is a crucial indicator of a company's operational efficiency, representing the proportion of sales revenue that exceeds the cost of goods sold.

In 2023, Kellogg's gross margin increased to 0.3264 from 0.3012 in 2022. This indicates an improving efficiency, given the positive change from 2022. Historically, this level is still weaker than past performance as Kellogg exhibited gross margins above 0.40 until 2008 before a downturn. Yet, compared to the industry median gross margin of 0.282 in 2023, Kellogg's performance remains favorable. Despite a lower long-term trend, the increase from 2022 to 2023 adds 1 point, signifying a positive operational adjustment. The broader context showcases Kellogg's struggle to return to its previous high margins while still managing a better than average sector performance.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. A higher ratio indicates better performance.

Comparing the Asset Turnover ratios, there is an increase from 0.69 in 2022 to 0.7692 in 2023. This is a positive development, highlighting Kellogg’s improving efficiency in using its assets to generate revenue. Historically, although their ratio was higher in the early 2000s (peaking at 1.1477 in 2008), the increase this year reverses a previous downward trend. Therefore, a score of 1 point is given in the Piotroski Analysis for improved Asset Turnover.