K – Market expectations are for record-high Uniform ROA, but management appears concerned about emerging market operations, profitability, and growth

• Kellogg Company (K:USA) is currently trading near recent lows relative to UAFRS-based (Uniform) Earnings, with a 20.0x Uniform P/E. However, even at these levels, the market has bullish expectations for the firm, while management appears concerned about emerging market operations, declining operating profit, and the sustainability of broad-based growth
• Specifically, management may be concerned about the sustainability of increased cereal consumption in emerging markets and their ability to improve emerging market margins, and may lack confidence in the investments made in recent quarters. Moreover, they may lack confidence in their ability to drive expected broad-based sales growth, and may be downplaying concerns about declining operating profit dollars. Additionally, they may have concerns about continued cost pressures, and may lack confidence in their ability to improve supply chain operations